An ISA account in the United Kingdom is an Individual Savings Account and is a tax-free way to save or invest in the UK. The current limit for how much you can contribute per year is £20,000. Different types of ISAs offer different benefits, but they all have the same key features:
- You don’t pay UK tax on any interest, dividends or capital gains you make from your ISA
- The money you put into your ISA (up to the annual limit) is protected from being counted towards your estate for Inheritance Tax purposes.
- You can withdraw money from your ISA at any time without losing any of the tax benefits.
You can get started by opening an ISA account via this website.
The main ISAs are Cash ISAs, Stocks and Shares ISAs, Lifetime ISAs and Innovative Finance ISAs
You can have more than one UK ISA account, but you can only pay into one of each type of ISA in any tax year. For example, you could have a Cash ISA and a Stocks and Shares ISA open simultaneously, but you cannot have two Cash ISAs.
The rules around how many ISAs you can have are different if you have a Help to Buy ISA or a Lifetime ISA. Help to Buy ISAs are designed to help first-time buyers save for a deposit on a property. When you buy your first home, the government will boost your savings by 25% (up to a maximum of £3,000).
You can only have one Help to Buy ISA at a time, but you can open it simultaneously with another type of ISA. For example, you can have a Cash ISA and a Help to Buy ISA open simultaneously.
Lifetime ISAs in the UK are designed to help people save for retirement or to buy their first home. You can save up to £4,000 per year into a Lifetime ISA, and the government will top up your savings by 25% (up to a maximum of £1,000).
You can only have one Lifetime ISA at a time, but you can open it simultaneously with another type of ISA. For example, you can have a Stocks and Shares ISA and a Lifetime ISA open at the same time.
You can only have one Innovative FinanceISA at a time, but you can open it simultaneously with another type of ISA. For example, you can have an Innovative Finance ISA and a Cash ISA open concurrently.
How many ISAs can you have open simultaneously in the UK?
You can have as many ISAs as you want, but there is a limit on how much you can contribute, which is called the Individual Savings Account (ISA) allowance; for the 2020/21 tax year, it’s £20,000. So, if you have one cash ISA and one stock and shares ISA, you can pay up to £20,000.
If you’re lucky enough to have saved more than this amount, then any money over the limit will not be covered by the ISA tax rules, which means that you’ll be liable for any taxes due on these savings.
There are some limitations on how you can use your ISA allowance. For example, you can only have one cash ISA and one stock and shares ISA in any tax year. You cannot open more than one ISA with the same provider in the same tax year.
If you’re considering opening an ISA, comparing the different options is essential before deciding. There are many ISAs available, so make sure you choose the right one for your needs. Using an independent financial advisor is the best way to compare UK ISAs. They can give you impartial advice on which ISA is best for you.
The final word
Like forex or crypto trading, opening an ISA can also be a great way to save money, but there are some things you need to consider before you do so. Make sure you understand the UK rules and restrictions around ISAs and compare different options to find the best one for you. With some research, an ISA can be a great way to save money and make your money work harder for you.