how many ISA accounts is the limit?

I have been recently asked by a friend of mine – how many ISA accounts can I have? He was concerned that he had a stocks ISA and a cash ISA in two different banks.

If you are all new to ISAs – I would suggest you start off with learning more about these here. There are many different types available. These all have their own benefits and risks. So knowing where your money goes is really important.

In a very short summary – ISA is a tool that allows you to save/invest and pay no tax on any gains you make. This is definitely a must for anyone looking to build a pot of cash for whatever needs you might have.

Below I will give a quick summary of the key rules that apply to this topic. While ISAs in general can be tricky to understand – this particular point is fairly uncomplicated…. surprisingly.

how many isa accounts can I have?

For some of you (hoarders and collectors) the below will be great news. You theoretically have no limit to how many ISAs you can hold. 

There is a whole separate question – do you actually need all of these? I will try to answer this in one of the chapters below. So keep reading if this is of interest to you.

So getting to the point here – you can have as many ISAs as you like. The only condition to this – you can only open 1 of each type of ISAs (a total of 4) in a given tax year. However, there is nothing to stop you from adding another ISA of the same type in the next financial year.

The types of ISAs that you can open are (I have explained each of the ISAs in more detail in this post):

• Cash ISA
• Lifetime ISA
• Stocks and Shares ISA
• Innovative Finance ISA

An example to the above would be – you can open Cash ISA and Shares ISA in the same year. You can’t however open 2 Shares ISAs with different providers. There is nothing though stopping you from opening a Shares ISA this year and then another one in the following year.

what’s the cash limit on these?

Many of you will know that the limit on ISA is currently at £20,000 per year. So the question you might have – having more ISAs means I can invest more cash tax free?

Well, unfortunately, the answer to this is NO! The £20,000 investment limit applies to an individual rather than an account. This means that no matter how many ISAs you have in your name – you can only deposit £20,000 per year.

There is a further rule – you can only deposit into one of each type of ISAs per year. What this means – if you have multiple Stocks ISAs as an example, you can only top up one of those in a given year. You can however split the money between different types of ISAs if that suites your needs better. Put some savings into Cash ISA and the rest into Stocks ISA.

There is a way to increase your ISA limit past £20,000. If you are a parent, you can also open a Junior ISA for your child which has an additional £9,000 limit per year. The money deposited into Junior ISA however belong to the child and only he will be able to withdraw this after reaching the age of 18.

is there a benefit to having many different isas?

You can use different types of ISAs for different needs. For example, your Stocks ISA is your longer term pot that you want grow over time to achieve a more comfortable retirement. At the same time, you might want to have a cash ISA as a place to store your emergency fund. While interest rates you get aren’t great, it’s better than getting nothing.

You can also use Lifetime ISA to save for your first home. This is the type of account where government gives you extra 25% on top of your investment. You can only put £4,000 out of your total allowance into this type of ISA every year.

There is potentially a benefit to be had with holding multiple accounts of the same type of ISA. Let’s say you like your Cash ISAs the most. Having multiple of these can help you through the fact that different banks will offer different interest rates at different times.

You might find a benefit of investing with a particular bank in one year and switching to a different one in the following tax year.

I personally hold 2 different Stocks ISAs with 2 different institutions – Barclays and HL. I can find different investment options in these two that work better for me at certain points in time. The key for me is to remember – which is the one I am investing into this financial year.

how many isa accounts is too many?

Let’s now imagine – you have been opening ISAs for many years now. You have realised that managing all of these is turning into a full time job on top of your regular job. You however know – if you take money out to put it into a different account, this will count as part of your annual allowance.

There is a solution for you here. With ISAs there is an option to transfer these between different accounts that you hold. By doing so you do not reduce your annual ISA allowance. This also allows you to merge ISAs into one so it is easier for you to manage these.

summary

ISAs are an amazing tool for any person looking to invest in one way or another. The difference that tax can make in the long run is massive. ISA allows you not to worry about paying any tax on any profits that you make.

You can have multiple ISAs however can only open 1 of the same type in the same financial year. On top of that – you can only invest into one of each type in any given tax year.

There are ways to benefit from having multiple different ISAs so have a good think of what is it that you want to achieve. Build a strategy around your end goals and use the tax benefits that ISAs are giving you.