Can You Have More Than One ISA at a Time?
Navigate the complexities of UK ISA rules. Understand how many ISAs you can open, contribute to, and transfer each tax year for tax-efficient savings.
Individual Savings Accounts (ISAs) are a popular UK savings and investment vehicle, offering tax-free interest, dividends, and capital gains. Many wonder if they can hold and contribute to multiple ISAs. This article clarifies the rules for managing multiple ISAs and their annual contribution limits.
Understanding ISA Types and Contribution Limits
The UK offers four primary types of adult ISAs, each designed for different financial objectives. A Cash ISA functions much like a standard savings account, allowing tax-free interest earnings on deposits. Stocks and Shares ISAs facilitate investments in the stock market through various assets, with any profits free from capital gains tax. Innovative Finance ISAs enable individuals to lend money through peer-to-peer platforms or invest in crowdfunding debentures, where interest earned is tax-exempt. Lastly, a Lifetime ISA supports saving for a first home or retirement, with a government bonus added to contributions.
The annual ISA contribution limit for the 2025/2026 tax year is £20,000. This allowance applies across all adult ISA types. For instance, an individual could allocate £5,000 to a Cash ISA and the remaining £15,000 to a Stocks and Shares ISA within the same tax year. While the total contribution cannot exceed £20,000, the Lifetime ISA has a specific annual cap of £4,000, included within the broader £20,000 limit.
Rules for Opening and Funding Multiple ISAs Annually
Individuals can hold multiple ISAs from previous tax years. A significant change from April 6, 2024, allows greater flexibility in contributing to new ISAs within a single tax year. Previously, contributions were restricted to one of each ISA type per tax year. Now, individuals can open and contribute to multiple Cash ISAs, Stocks and Shares ISAs, and Innovative Finance ISAs from different providers within the same tax year.
This means an individual could contribute to two different Cash ISAs with separate providers, or a Cash ISA and two different Stocks and Shares ISAs, as long as the total amount contributed does not exceed the £20,000 annual allowance. The only exception is the Lifetime ISA; one can still only contribute to a single Lifetime ISA per tax year. Despite increased flexibility, individuals remain responsible for managing contributions to stay within the annual limit.
Transferring Existing ISA Funds
Transferring funds between ISAs allows individuals to consolidate savings or switch providers without losing tax-free status. The process involves contacting the new ISA provider and completing their official transfer form, rather than withdrawing the money yourself. Directly withdrawing funds from an ISA and then re-depositing them into a new account will cause those funds to lose their tax-free wrapper. Transferring funds does not count towards the annual ISA allowance, preserving the ability to make new contributions for the current tax year.
The rules for transferring funds depend on when the contributions were made. Funds contributed in the current tax year must be transferred in their entirety. For money saved in previous tax years, individuals can transfer all or a portion of the funds. Transfers can also occur between different ISA types, such as moving a Cash ISA to a Stocks and Shares ISA. However, transferring a Lifetime ISA to a different ISA type before age 60 can result in a 25% withdrawal charge.
Consequences of Exceeding ISA Rules
If an individual contributes more than the annual ISA allowance or breaches other rules, HM Revenue & Customs (HMRC) will identify the excess. ISA providers report contributions to HMRC for cross-verification. Any contributions beyond the permitted limit are deemed invalid and lose their tax-free status.
HMRC will contact the individual to inform them of the over-subscription. Interest or gains generated on the excess portion will become taxable. To rectify the situation, the individual may be required to withdraw the excess funds. Prompt action and cooperation with HMRC can help mitigate further complications and ensure compliance.