As well as answering the main question ‘How Many ISAs Can I Have’ this article also covers the following:

  1. What Is An ISA Investment?
  2. How Many ISAs Can I Have?
  3. Types of ISA
  4. Accessing or Transferring An ISA

1) What is an ISA Investment?

An Individual Savings Account (or ISA) is a tax-efficient way to save. As long as you keep within the ISA allowance each year, your money is shielded from:

  • Income Tax
  • Tax on dividends
  • Capital Gains Tax

More information can be found on gov.uk

2) How Many ISAs Can I Have?

Each year the Government sets an ISA allowance. The allowance, for the tax year 2020/2021 is £20,000.

How many ISAs you have will depend on the amount of funds you have available to invest each year as you cannot roll over any unused allowance from one tax year to the next. How you decide to invest will depend on your attitude to risk along with your time horizon.

The number of ISAs and the sum of money you invest each year, in whatever combination you decide to invest it (e.g. Cash ISA, Stocks & Shares ISA, Innovative Finance ISA etc) must not exceed the ISA allowance for that year.

However, remember there are some restrictions: you can only pay a maximum of £4,000 into a Lifetime ISA per tax year, and you can only contribute to one of each type of ISA per tax year.

There are also a few specific limits that apply to certain types of ISA. For example, the maximum annual contribution to a Junior ISA for 2020/2021 is £9,000 per child, no matter where the contributions come from.

3) Types Of ISA

  • Cash ISA
    Available for individuals aged 16 & over.

    A Cash ISA is similar to a normal savings account, except no tax is payable on the interest you earn. You can make a single or regular contributions as long as you keep within the annual ISA allowance and the return on your investment will depend on whether you want instant access or are prepared to lock your money away for a fixed term.

  • Stocks and Shares ISA
    Also known as an investment ISA, a stocks and shares ISA is a tax efficient way to invest in wide variety of stocks and shares including equities, bonds or commercial property. You can choose to invest in a ready made ‘fund’ or research and select your own shares to buy.

    Important Note: Whilst a Stocks and Shares ISA has the potential for higher growth than a standard Cash ISA, the risk is also higher as the value of stocks and shares can go up as well as down.

  • Junior ISA
    Specifically for children under the age of 18, maximum annual alowance (as at 2020/2021) £9,000 per child.

    Grandparents / Parents often choose to open a Junior ISA as the child cannot touch the money until they reach 18. The investment can be in the form or cash, or stock & shares. Once the child reaches 18, it will convert into a standard ISA.

  • Lifetime ISA
    A Lifetime ISA can be opened by anyone over 18 up to the age of 40. Maximum annual allowance (as at 2020/2021), £4,000.

    Designed to help you save your first home or for your retirement. Contributions can be made until you reach 50, but withdrawals, without penalty, can only be made to buy your first home, or which you reach 60. The Goverment add a 25% bonus to your savings up to a maximum of £1,000 each year (on a monthly basis), until your reach 50.  Again, the investment can eb in cash or stocks and shares.

  • The Help to Buy ISA

    The Help to Buy ISA is a type of cash ISA. It’s a government scheme to help first-time homebuyers save for a mortgage deposit to buy a home. To qualify, you must be a first-time buyer and not own property anywhere in the world. The Help to Buy ISA closed to new accounts at midnight on 30 November 2019.

    Your first payment to your Help to Buy ISA can be up to £1,200, and after that you can contribute up to £200 each month. The government will top up any contributions you make by 25%, up to the maximum contribution limit of £12,000. This means you can get a total of £3,000 from the government.

    What’s more, if you’re planning to buy a home with someone else, you can each open a Help to Buy ISA – meaning that you could get up to £6,000 from the government to put towards your first home.

    Help to Buy ISAs can be used for homes costing up to £450,000 in London and £250,000 outside London. If you’d like to buy a property outside London for more than £250,000, the Lifetime ISA might be a better option for you.

  • Innovative Finance ISA
    This type of ISA allows individuals to make peer-to-peer lending investments within a tax-free wrapper.

    So you’re able to invest in peer-to-peer lending platforms without paying capital gains tax on your returns.

    If you invest in P2P lending you may get a better interest rate than through a high street bank savings account. But the risks are greater, too. If the ‘peer’ you lend to doesn’t perform as expected, you could bear the brunt of any losses, and those losses are final if they default on a payment.

    Liquidity can also be an issue if you want to withdraw your money before the end of the term of the loans you’ve made.

    Innovative Finance ISAs aren’t currently backed by the Financial Services Compensation Scheme (FSCS), so you may want to approach these ISAs with caution.

Are you primarily looking for an income from your investments and savings?

Download this free guide to help you understand how find the best income solutions in a low interest rate environment.

Asset Allocation Guide
By submitting the form to request this guide, you agree to receive relevant messages from TT Wealth.  Your email address will NEVER be shared or sold. You are always free to easily unsubscribe or customise your email preferences at any time. If you have any questions, please contact: tony@ttwealth.co.uk

4) Accessing or Transferring An ISA

Can I transfer or consolidate my existing ISA(s)?

Yes, you can transfer an existing ISA from one provider to another as long as it is allowed within the product terms and conditions.

Note: Transfers from investments made in previous years can be done in part or full, whereas transfer from any money invested in the current tax year, must be for the full amount.

What happens to my ISA if I die?

ISAs retain their tax benefits after you die, until they’re closed. An added benefit is that your spouse or civil partner can inherit the value of your ISA as a one-off additional tax-free allowance.

If no spouse or civil partner, your ISA will end when either:
– your executor closes it
– the adminstration of your estate is completed

Otherwise, your ISA provider will close your ISA 3 years and 1 day after you die.

There will be no Income Tax or Capital Gains Tax to pay up to that date, but ISA Investments still form part of your estate for Inheritance Tax purposes.

When can I access my money and do I pay tax on ISA withdrawals?

ISAs allow you to take your money out of an ISA at any time, without losing any tax benefits.  The exception to this rule is the Lifetime ISA as your money can only be withdrawn to make a first time house purchase, or if you are saving for retirement, when you reach 60.

In order to attract a higher rate of return, some ISA’s tie your money up for a specific period of time. You will need to check your providers Terms and Conditions to see if there are any access penalties and/or fees.

In Summary

When it comes to tax efficient investments, there are many areas to explore. If you would like to book a free 30 minute initial chat, please click the button below, or contact Tony Thomas on 07585 592494 or tony@ttwealth.co.uk

Book Appointment