Can I Have More Than One Cash ISA Account?
Unravel the complexities of Cash ISA rules. Learn how many accounts you can hold, fund, and transfer to optimize your tax-free savings.
Individual Savings Accounts (ISAs) offer a tax-efficient way to save or invest money in the UK. A Cash ISA functions like a standard savings account, with interest earned entirely free from UK income tax. This tax-free benefit makes ISAs a popular choice for maximizing savings growth.
Opening New Cash ISA Accounts
As of April 6, 2024, ISA regulations provide greater flexibility for savers. Previously, individuals could only subscribe new money into one Cash ISA during a single tax year. The updated rules now permit opening and contributing new funds to multiple Cash ISAs, as well as multiple Stocks and Shares ISAs or Innovative Finance ISAs, within the same tax year.
Despite this increased flexibility, a collective annual allowance governs the total amount that can be saved across all ISA types. For the 2024-2025 and 2025-2026 tax years, this overall ISA allowance stands at £20,000. This allowance applies to all adult ISA types, including Cash ISAs, Stocks and Shares ISAs, and Innovative Finance ISAs. While you can split your allowance across these different types, you must ensure your total contributions do not exceed the £20,000 limit.
It is important to note that Lifetime ISAs have a specific annual contribution limit of £4,000, which counts towards the overall £20,000 allowance. Additionally, you are restricted to opening only one Lifetime ISA and one of each type of Junior ISA per tax year. The tax year in the UK runs from April 6 to April 5 of the following year.
Transferring Existing Cash ISA Accounts
Transferring funds from existing Cash ISA accounts follows different rules than contributing new money. Money saved in Cash ISAs from previous tax years can be transferred to a new or existing ISA without counting against the current tax year’s ISA allowance. This allows savers to consolidate accounts or seek better interest rates without impacting their annual contribution limit.
The transfer process must be initiated by the new ISA provider to maintain the tax-free status of the funds. Directly withdrawing money from an ISA and then re-depositing it into a new account will cause those funds to lose their tax-free wrapper and count against your current year’s allowance if re-subscribed. Transfers between Cash ISAs typically complete within 15 working days. Transfers involving other ISA types, such as Stocks and Shares ISAs, may take up to 30 calendar days.
Changes in April 2024 introduced the ability to make partial transfers of current tax year subscriptions. Previously, if you had contributed to an ISA in the current tax year and wished to transfer it, the entire amount contributed for that year had to be moved. Now, you have the flexibility to transfer only a portion of the current year’s savings, along with any previous year’s funds.
Holding Multiple Cash ISA Accounts
It is permissible to hold multiple Cash ISA accounts. This is common for individuals who have opened accounts in different tax years or have transferred funds between providers. With the rule changes effective from April 6, 2024, it is now also possible to open and contribute to several Cash ISAs within the same tax year, provided the overall annual ISA allowance is not exceeded.
Managing multiple accounts, potentially with different providers, can introduce administrative considerations. This may involve keeping track of various logins, passwords, and annual statements. It is important to accurately monitor all contributions to ensure compliance with the annual £20,000 ISA allowance. All funds held within these accounts continue to benefit from the tax-free growth.