How Many ISAs Can You Have?
ISAs were established to encourage Brits to save more each year.
The largest advantage to an ISA is that you don't have to pay any taxes on the money you earn. This includes interest earned on cash ISAs, as well money made from sales of shares within investment ISAs. However, those tax advantages also mean a few rules apply to setting up and contributing to ISAs every year.
There are four types of ISA - Cash ISAs, Stocks and Shares ISAs, Innovative Finance ISAs and Lifetime ISAs. Each person is allowed to open one of each type of ISA each tax year with a minimum age of 18 for all ISAs except the Cash ISA where the minimum age is 16. The maximum combined amount you can put across all types of ISA each tax year is known as the ISA allowance and the current 2017-18 tax year ISA allowance is £20,000 per individual.
Please note that there is also a separate type of ISA, the Junior ISA, available for those under 18.
If you err and open more than one cash or shares ISA in a single tax year, it is important to notify your fund manager or bank right away. In some cases, the ISA may be allowed to remain open, once you have consulted with HM Revenue and Customs.
Keeping ISAs Open
Once your ISA is open, you can leave it for as long as you like. You can add to your current ISAs each year, or open entirely new accounts. Keep in mind that if you continue to open new accounts, you will need to monitor them regularly to ensure they are earning the best returns possible.
Some individuals do not like the idea of having multiple ISAs because of the difficulty tracking them, while others like the diversity that more than one or two ISAs offer.
Instead of opening news ISAs each year, you also have the option to transfer current ISAs into different types of accounts. If you do decide to transfer ISA money, do not simply withdraw funds to move them, or you will lose your tax advantages for that year. Instead, initiate the transfer through the receiving manager or institution so your transaction is counted as a transfer, rather than a withdrawal.
By understanding the rules regarding ISAs, you can make the most of your money without fear of penalty or losing your tax advantages.
Many ISA providers allow you to invest monthly. Nutmeg offer a simple ISA plan where you can set up different pots for different savings objectives e.g. house fund; children's saving fund where you can decide on the different risk levels you are prepared to take. For more information on how you can invest tax efficiently click here »