Can You Have More Than One ISA?
Navigate the complexities of UK ISA rules. Discover how to hold multiple Individual Savings Accounts and maximize your tax-free savings.
An Individual Savings Account (ISA) offers tax-efficient growth. While tax-advantaged savings vehicles exist globally, ISAs are specific to the United Kingdom. This article explores the structure and regulations surrounding ISAs, including how multiple accounts can be held and managed.
Types of ISAs
The UK offers several types of Individual Savings Accounts, each tailored to different financial goals.
A Cash ISA exempts interest earned from UK income tax. These accounts are suitable for short-term savings or emergency funds. Stocks and Shares ISAs allow individuals to invest in assets like company shares, bonds, and funds, where capital gains or dividends are free from UK income tax. This type of ISA is considered for longer-term investment horizons due to market fluctuations.
The Lifetime ISA (LISA) helps younger individuals save for their first home or for retirement. Contributions to a LISA receive a 25% government bonus, up to a maximum of £1,000 per year, on annual contributions of up to £4,000. Age restrictions apply for opening and contributing to a LISA, for those aged 18 to 39, with contributions allowed until age 50.
An Innovative Finance ISA (IFISA) allows tax-free returns on peer-to-peer loans and crowdfunded debt. This type of ISA carries higher risks compared to Cash or Stocks and Shares ISAs. Junior ISAs (JISAs) are available for individuals under 18, allowing tax-free savings or investments for a child’s future, with funds accessible when they turn 18.
Rules for Opening and Contributing
Rules for opening and contributing to Individual Savings Accounts are important to maximize their tax benefits. While it is possible to hold more than one ISA, strict regulations govern how many can be opened and contributed to within a single tax year. The UK tax year runs from April 6th to April 5th of the following year.
Individuals can open and contribute to one of each type of adult ISA in any given tax year, including Cash, Stocks and Shares, Innovative Finance, and Lifetime ISAs. An annual ISA allowance applies. For the 2025/2026 tax year, this allowance is £20,000. While multiple types of ISAs can be funded, the total amount contributed across all of them cannot exceed this annual allowance.
Contributions to a Lifetime ISA count towards the annual ISA allowance. For instance, if the maximum £4,000 is contributed to a LISA, the remaining allowance for other ISA types would be £16,000. Junior ISAs operate under a separate allowance, which is £9,000 for the 2025/2026 tax year. Contributions to a JISA do not affect an individual’s adult ISA allowance, as the money belongs to the child. The annual allowance resets each tax year and cannot be carried forward if unused.
Managing Your ISA Portfolio
Managing an ISA portfolio involves transferring funds between accounts or providers. Transfers allow individuals to consolidate their savings or move to accounts offering better terms, while preserving the tax-free status of their funds.
Funds held in an ISA can be transferred from one provider to another, or between different ISA types, without counting towards the annual ISA allowance. For example, money can be moved from a Cash ISA to a Stocks and Shares ISA, or vice versa, subject to specific rules, such as those for Lifetime ISAs. When transferring funds contributed in the current tax year, the entire amount subscribed that year must be transferred. However, funds from previous tax years can be transferred in full or in part.
The process for initiating an ISA transfer involves contacting the new provider. The new provider handles the transfer directly with the old provider, ensuring tax-free status. This direct transfer mechanism is important because withdrawing and re-depositing funds yourself would be considered a new subscription, counting against the current year’s allowance and potentially losing tax benefits. While transfer times can vary, cash ISA transfers take up to 15 working days, and other types of transfers can take up to 30 calendar days.
Consequences of Exceeding Limits
Exceeding the annual ISA contribution limits or opening more than the permitted number of the same ISA type in a tax year leads to consequences. Her Majesty’s Revenue and Customs (HMRC), the UK’s tax authority, monitors ISA contributions.
If an individual contributes more than the annual allowance or breaches the rules for opening accounts, HMRC will identify the over-subscription. The excess funds will lose their tax-free status. Any interest or gains generated on these excess amounts will become taxable income.
HMRC contacts the individual to rectify the situation, often requiring withdrawal of excess funds or declaring them taxable. In cases of over-subscription, the tax relief on the excess amount is lost, and the individual may be liable for income tax on interest or dividends, and Capital Gains Tax on any profits.