How many accounts can I have? And what if I breach the £20,000 annual cap?
We answer all of your Isa queries
HAS it been a while since you last paid any attention to Isas? you can’t remember all the rules and restrictions on paying money in, taking it out and moving accounts . . . Don’t worry, you’re not alone.
Many of us fell out of love with these tax-free accounts as rates were cut to the bone. A hazy memory for the details is par for the course.
Here, we take you back to Isa school for a refresher course on how the accounts work . . .
How many Isas can I have?
yOU can save into only one cash Isa, and one stocks and shares Isa per tax year (starting April 6 and ending April 5 the following year). Ordinarily, that means you won’t be able to open more than one type of cash product — even when it’s with the same provider.
This can catch people out who open a fixed-term Isa, for example, with less than the full allowance and then try to deposit the rest elsewhere later in the year.
In this case, the only way to maximise your allowance for that tax year is to open another type of Isa — a stocks and shares Isa, for example.
However, a small group of providers will allow you to open several different types of cash Isa with them. These deals are known as Portfolio Isas.
Typically, Portfolio Isas allow you to deposit cash into a fixed-rate Isa and an easy-access Isa without breaking the Isa rules. In effect, you are given a single Isa ‘wrapper’ and can split the money within it how you like.
But not all Isa providers operate Portfolio accounts. So check carefully before proceeding.
Can Isas be joint accounts?
nO, yOU can have an Isa in only one name. But you can inherit the Isa allowance of your spouse or civil partner if they die. As well as your normal Isa allowance, you can add a tax-free amount up to the value they held in their Isa.
How do I move cash Isas for better rates?
THIS should be simpler than switching a non- Isa savings account, says Anna Bowes, cofounder of rate monitoring website Savings Champion.
But there is a critical rule you need to follow in order to retain the tax-free status: you must not cash in your Isa yourself.
Instead, you should go to the new provider you want to switch to, fill in their application and Isa transfer form, then let them do the legwork.
They will make the request to your current provider and everything will happen seamlessly without further input from you. you don’t need to inform your old provider. The whole process should take no longer than 15 working days.
Can I move my shares Isa into cash?
In THE past, it wasn’t possible to transfer money from a stocks and shares Isa into a cash Isa, says Clare McCarthy, a chartered financial planner from The Private Office.
Savers could only transfer money the other way — from cash to shares. But the rules have changed and it’s straightforward to go either way.
As with transferring from one cash Isa to another, you still need to ask the new provider to carry out the transfer for you.
It should take no longer than 30 calendar days. Don’t be tempted to take the money out and transfer it yourself.
Are there restrictions on switching?
IF yOU want to transfer money you’ve invested or saved during the current tax year, you must transfer all of it — otherwise you will break the Isa rules of having only one of each type of Isa in a tax year.
For money you have put into an Isa account in previous years, you can choose to transfer all or part of it.
What about if I go over the limit?
AnnA BOWES says: ‘Mistakes happen, but you will get found out.
‘So it’s important to keep clear notes about how much you’ve paid into your Isa each tax year and with whom.’
Bear in mind that moving old Isas into a new account doesn’t count towards your allowance.
The £20,000 limit applies only to money paid in from outside an Isa this tax year.
There are four different types of adult Isa: cash Isa, stocks-andshares Isa, Innovative Finance Isa (peer-to-peer lending) and the lifetime Isa.
you can open one of each per tax year. But the total amount deposited across all of them must not exceed the £20,000 annual Isa allowance.
Ms Bowes says: ‘ your Isa provider will inform HM Revenue and Customs about funds added into your Isas, so if you breach the allowance or open more than one type, they can identify which account flouted the rules and begin the process of unravelling the mistake.’
Any money that was put into the Isa in error will not be exempt from tax and will be sent back to the saver.
Can you replace withdrawn Isa cash?
PREVIOUSly, if you withdrew money from an Isa, you could not put that money back in without it counting towards your current annual Isa subscription.
now the rules allow you to take out money and replace it within the same tax year — whether it’s from an old Isa or your current tax year’s Isa without using up your allowance. However, this perk is available only on a ‘flexible Isa’. And not all Isa accounts — whether cash or stocks and shares — fall under this description.
So check with your Isa provider before you act.