You can have more than one, but you can only open one of each type of Individual Savings Account (ISA) in the same year, and there are a few other considerations.
What are the various types of ISA?
There are four types of ISA:
- Cash ISAs: These are similar to regular savings accounts, but the interest earned is tax-free.
- Shares & Stocks ISAs: These enable you to invest in funds and other types of investments. One of the primary advantages of a Stocks & Shares ISA is that any investment growth is tax-free.
- Lifetime ISAs: These are designed specifically for people who want to save for a first home or for life after retirement. The government contributes an additional £1 for every £4 you save. A Lifetime ISA allows you to save up to £4,000 per year (£5,000 if you include government contributions). You must be under 40 to invest in a Lifetime ISA, and you can make contributions until your 50th birthday.
- ISA for Juniors: This is a long-term savings account established by a parent or guardian for the benefit of their child’s future. Only the child has access to the funds, and only after they reach the age of 18.
The next step is to figure out how much money you can put into an Individual Savings Account (ISA):
Each tax year, you can only invest a certain amount in an ISA – £20,000 in 2020/21. You can invest that money in Cash or Stocks & Shares ISAs in any combination you want.
If you qualify for a Lifetime ISA, you can invest up to £4,000 every year, which contributes toward your £20,000 total. As a result, you can divide your allowance whatever you see fit for you and your financial objectives.
Any money put into a Junior ISA is subject to a £9,000 restriction (2020/21). It doesn’t count towards your own ISA’s £20,000 maximum.
So, how many are you allowed to have?
In a given tax year, you can only open one of each form of ISA. You can’t have two Stocks & Shares ISAs in the same tax year, but you can have one Stocks & Shares ISA and one Cash ISA.
If you open multiple ISAs, keep in mind that you can’t invest more than £20,000 in total in a single tax year.
How can you tell which one is the best fit for you?
It all boils down to what you want to achieve. It’s also a good idea to think about your risk tolerance and the amount of time you want to save.
If you wish to grow the value of your money over a longer period of time, for example, a Stocks & Shares ISA can be a good option. This is because investing has a better possibility of growing your money over time than, say, a Cash ISA. However, the value of investments can go up and down, and you may receive less than you put in, which is not the case with a Cash ISA.
