Can You Pay Into More Than One ISA?

Individual Savings Accounts (ISAs) are a popular financial tool in the UK, designed to help individuals save and invest money in a tax-efficient manner. These accounts allow any interest earned, investment gains, or dividends to grow free from UK income tax, capital gains tax, and dividend tax. This tax-advantaged status makes ISAs a valuable tool for personal financial planning.

Annual Contribution Limits

Each tax year, which runs from April 6th to April 5th of the following year, the UK government sets an annual limit on the total amount an individual can contribute to their ISAs. For the 2025/2026 tax year, this overall ISA allowance is £20,000. Regardless of how many ISA accounts a person might have, or how many different providers they use, the combined total of new money paid into these accounts within a single tax year cannot exceed this £20,000 allowance. If the full allowance is not used by the end of the tax year, it cannot be carried over to the next year; it operates on a “use it or lose it” basis.

Understanding ISA Types and Contributions

The UK offers several types of ISAs, each designed to meet different savings and investment goals. The primary types include the Cash ISA, Stocks and Shares ISA, Innovative Finance ISA, and Lifetime ISA. A Cash ISA functions much like a traditional savings account, allowing tax-free interest on deposits, while a Stocks and Shares ISA facilitates tax-efficient investing in a range of assets like company shares, funds, and bonds. Innovative Finance ISAs enable individuals to earn tax-free returns from peer-to-peer lending and crowdfunding debentures.

A significant change introduced in April 2024 allows individuals to open and contribute to multiple ISAs of the same type within a single tax year, with specific exceptions. For example, a person can now contribute to several Cash ISAs or multiple Stocks and Shares ISAs with different providers. However, the Lifetime ISA remains an exception, permitting contributions to only one Lifetime ISA per tax year.

The £20,000 annual allowance can be split across these different ISA types. For instance, an individual could contribute £5,000 to a Cash ISA, £4,000 to a Lifetime ISA, and the remaining £11,000 to a Stocks and Shares ISA in the same tax year, provided the combined total does not exceed £20,000. The Lifetime ISA has its own annual contribution limit of £4,000, which counts towards the overall £20,000 allowance. Junior ISAs, designed for those under 18, have a separate annual allowance of £9,000.

Managing Your ISA Portfolio

Managing an ISA portfolio involves utilizing the annual allowance and transferring funds between accounts. Transferring funds from an ISA opened in a previous tax year does not impact the current year’s allowance, allowing individuals to consolidate or reallocate older savings without affecting new contributions. These transfers can be partial or full, depending on the individual’s needs.

When transferring contributions made in the current tax year, the general rule is that the entire amount contributed to that specific ISA for the current year must be transferred in full to the new provider. Some providers, following rule changes from April 2024, may allow partial transfers of current year subscriptions, but it is essential to confirm this with the receiving provider. The process for initiating an ISA transfer involves contacting the new ISA provider, who will arrange the transfer directly with the existing provider, ensuring the tax-free status of the funds is maintained. This direct transfer mechanism is important, as withdrawing funds from an ISA and then re-depositing them into a new one would cause the money to lose its tax-free status and count against the current year’s allowance.

Correcting Excess Contributions

If an individual accidentally contributes more than the annual ISA allowance, or subscribes to a Lifetime ISA when they have already contributed to one in the same tax year, corrective action is necessary. The excess payments will not qualify for tax relief, meaning any interest or gains generated by these over-contributed funds will be subject to tax. HM Revenue & Customs (HMRC) is the tax authority that monitors ISA contributions and will identify over-contributions.

HMRC or the ISA provider will contact the individual to inform them of the excess contribution. For overpayments made in the current tax year, individuals should contact their ISA provider as soon as possible, as the provider may be able to help refund the excess and remove any associated gains. If the over-contribution occurred in a previous tax year, individuals should await contact from HMRC, who will provide instructions on how to rectify the situation, which often involves removing the excess funds from the ISA. While there are no fines for accidental over-contributions, the tax benefits on the excess amount are lost, and the individual may need to pay tax on any income or gains generated by those funds.