Can I Have More Than One ISA?

Can i have more than one ISA? You can – but it’s a little complicated. Let me simplify it for you.

You have an ISA allowance of £20,000 each year. You can divide that between different types of ISAs – like a cash ISA, stocks and shares ISA or a Lifetime ISA.

There’s even now the Innovative Finance ISA (IFISA) which are more common among fintechs and unusual asset classes like peer to peer (P2P) lending.

You May Already Have Multiple ISAs

Technically, even if you only have one ISA then you open a new ISA every year. So if you have held an ISA for a long time then you technically have many ISAs. You can even transfer them between providers providing you don’t pay any more into them.

Each year you can also open multiple types of ISAs as long as the total amount you pay in across your ISAs is no more than £20,000. However you cannot open multiples of the same type of ISA.

Can I Have More Than One ISA? Different Types

I personally have a stocks and shares ISA with Freetrade and a lifetime ISA with Hargreaves Lansdown. The Freetrade ISA has simply renewed from last year and I have kept paying into it. If I wanted to I could pay into my HL LISA – in effect opening a new Lifetime ISA – or I could open one with another provider. If I wanted to I could also transfer that previous year’s ISA to another provider.

The Lifetime ISA

If you are saving for a house or retirement a Lifetime ISA is a great way of opening multiple stocks and shares ISAs because you can open a stocks and shares LISA. However, the total amount paid in cannot exceed £20,000 across the two. Of course if you have a cash ISA then your £20,000 limit is divided across all three.

The Lifetime ISA lets you pay in up to £4000 each tax year. But the great thing is you get a 25% contribution from the Government on all your contributions. So if you pay in £4000 straight away you will get £1000 upfront, normally paid in about a month or so. So in effect, if you have a LISA and another kind of ISA you end up with a total limit of £21,000, although you only paid in £20,000.

In a stocks and shares ISA you can then leverage that to potentially generate returns (or losses).

Research Carefully

I didn’t renew my LISA this year because I was looking to buy a property. That caught me out. I had envisioned being able to pay in the full £4000 from my savings, get the £1000 bonus and then close the account when I bought my property.

While my Freetrade ISA had renewed automatically (I just saw my limit refresh in the app and kept paying in), the same was not for my LISA. I contacted Hargreaves Lansdown who advised that as it was a new tax year I had to open a new LISA if I wanted to keep paying in.

But looking at the terms of opening a new LISA, I saw that I was not allowed to access the money for 12 months. That took me by surprise. That meant had I bought a property earlier, in the last tax year, then I would not have been able to use my LISA as I had opened it within the last year.

Had I opened a new one I would not have been able to use the money for a property. It would be locked up and I would have to either leave it for retirement or pay the substantial fine required to cash out a LISA early.

This is why it is important to read carefully about ISA rules and ask your provider if you’re unsure. The Lifetime ISA is especially confusing because you can only use it for first home purchase or retirement. You can get around that by paying a fine but that is likely to wipe out historical government bonuses and probably a lot of your returns.

So before you go rushing in to open multiple ISAs, especially a LISA to get the bonus, make sure to do your homework and assess your financial plans.

Growing Your ISA Allowance Over Time

The incredible thing about that is while you can only pay in £20,000 each year into an ISA, you can still keep investing the proceeds. That Lifetime ISA I didn’t renew I might not be able to pay into but I can keep buying and selling stocks while watching it grow.

So if you make a 20% one year that year’s ISA then has £24,000 in it. Do the same the following year and you’ll have £28,800. Pretty powerful, and that extra £1000 can make a big difference.

So if you’re still asking can I have more than one ISA then a good rule of thumb is yes, but only one of each type. And even then, your limit is still £20,000.

However, the aim is to keep growing your ISA so you stack up huge savings for tax-free returns. Add up five years of ISAs and you’ll have £100,000 if you paid in the full allowance each year, but whether in cash interest or stock returns you’ll have hopefully been making gains on each of those ISAs to grow a huge pile of wealth.

Stewart Vickers
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