CAN YOU HAVE MORE THAN ONE ISA?
Before this year, savers were limited to only paying into one of each type of Isa in a tax year, but this rule has now been scrapped.
There is currently no limit on the number of Isas you can have, or how many you can open or pay into.
You might choose to open a new cash Isa if, for instance, you find one offering a higher interest rate than one you opened during previous tax years. You might open a new stocks and shares Isa if you spot one that charges lower fees than you currently pay with an existing account.
Here, Telegraph Money explains the latest Isa rules.
How many Isas can you open in a single tax year?
There is no limit on how many Isas you can open in a single tax year. However, you should still think carefully before depositing money in an Isa.
Does the Isa you’re considering offer competitive interest rates? If there are fees associated with the account, are they worth it and can you beat them elsewhere? Depending on the type of account you may not be able to withdraw your cash and move it into a better one.
If you are able to make withdrawals, you often won’t get back the amount of your Isa allowance that you’ve already used up. If you’re unsure, check with the provider before opening an account.
It’s also important to remember that, while you can open as many Isas as you like, you’ll still be limited to a maximum total deposit of £20,000 across all of them.
What about Isas from previous tax years?
Isas that you opened during tax years gone by are generally unaffected by new accounts. If you like, you can continue paying into Isas that you opened during previous tax years instead of opening new ones.
Alternatively, many Isa providers allow you to transfer funds over from other Isas in your name with the same or different providers.
You’ll still be limited to a maximum deposit of £20,000 across all Isas during each tax year.
Is it wise to have multiple types of Isa?
It’s perfectly normal to have multiple types of Isa, as each one serves a different purpose.
You might opt for a cash Isa if you want to earn tax-free interest on your savings. If you want to invest your money and pay no tax on the returns, a stocks and shares Isa may be suitable for you.
You might choose to do both of these things at once – a cash Isa is a more reliable option, while investing through a stocks and shares Isa carries risk but could earn you greater returns. With any investment, the value of your pot can go down as well as up.
If you’re saving for a first home or retirement and you’re aged between 18 and 39, you may also choose to open a lifetime Isa in addition to a cash Isa or stocks and shares Isa.
A lifetime Isa lets you earn a 25pc bonus of up to £1,000 each tax year on your savings, along with what tends to be a small amount of interest.
However, note that a 25pc withdrawal penalty will be charged should you use the contents of your lifetime Isa for anything other than a first home purchase or retirement.
You can also only use your lifetime Isa savings towards a home worth £450,000 or less.