You’ve probably come across the ISA acronym before. But did you know there are quite a few different accounts available? This then begs the question – just how many ISAs can someone have?
I’m going to explain everything you need to know about how many of these accounts you can sign up for and how to spread your money around them.
What is an ISA?
Let’s do a quick refresher just to make sure we’re starting on the same page.
ISA stands for individual savings account. We Brits like to give things official-sounding names but this is just a place where you can keep money.
These accounts come with some unique advantages for UK residents and can do wonders for your finances. The main benefit is that an ISA acts as tax wrapper, protecting your funds from the taxman!
How many types of ISAs are there?
This type of savings account has been really popular since it was first whipped up, and seeing as everybody loves a sequel – new types of ISAs crop up from time to time.
The current line-up for adults to choose from in the ISA cinematic universe (ISA-CU) looks like this:
- Cash ISA
- Stocks and shares ISA
- Innovative finance ISA
- Lifetime ISA
So there are plenty of options, but how many ISA accounts can you actually have?
Can you have more than one ISA?
You certainly can! But before you start opening accounts left, right, and centre – hold your horses. There are some key things to consider first.
Each year, you can only open and pay into one account of each ISA type. For example, you could open a Hargreaves Lansdown stocks and shares ISA this tax year, but you’d have to wait until next year before opening an account with Interactive Investor.
So you couldn’t open twenty stocks and shares (S&S ISA) accounts in the same tax year and spread your £20,000 annual allowance between them.
How many ISAs can you have?
Your yearly allowance can be spread across a Cash, Innovative Finance, Lifetime, and S&S ISA. But keep in mind the Lifetime ISA (LISA) has slightly different rules and you can only put in a maximum of £4,000 each year.
This all means you can have up to four types of ISAs. But the number of actual accounts you can have may end up being a lot more than four.
Because each year you could open a new account from each category, ending up with a myriad of ISAs over time.
Can you transfer an ISA?
Because of the rules around these accounts, you may find yourself with lots of them scattered all over the place.
The good news is, you can transfer your ISAs amongst different providers. This can make your accounts a lot easier to manage.
So if you already have an ISA, you are able to open one elsewhere and bring over your balance to the new provider. Just make sure you use the ISA transferring service. Don’t withdraw the balance and then try to put that in a new account.
What is the best type of ISA to use?
This will really depend on your personal circumstances. There are various rules that apply to each type of account, so some may suit you better than others.
For example, you have to be under 40 to pay into a LISA. Also, the Innovative Finance and S&S ISAs are both for investing – but you get a lot more flexibility with a stocks and shares ISA account.
So before you decide to lump money into one of these, have a think about your goals. Do you just want somewhere safe to store your cash or are you looking to get a better return on your savings?
Your strategy will then dictate how many ISAs it makes sense for you to have. There’s no point using them all just for the sake of it.
If you decide to go for higher returns, just remember that this may involve more risk. Taking on extra risk means that there is a higher possibility your funds may lose value. But this often leads to a better chance of superior rewards. So this is a decision you’ll have to weigh up for yourself.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.