Investments can go down as well as up in value, so you could get back less than you put in.
How does the ISA allowance work?
There are four types of ISAs. Every adult in the UK gets a yearly ISA allowance. The amount you can save in an ISA this year is £20,000. However, you can only put funds into one ISA each tax year, such as one cash ISA, one stocks & shares ISA, one IFISA, and/or Lifetime ISA.
Does taking money out affect your annual ISA allowance?
Cash ISAs can be flexible, meaning you can withdraw and replace your funds without affecting the annual ISA allowance. Just remember that you must return the money within the same year. If you put the money back in next year, it will count towards the new ISA allowance. This rule is for funds held in Innovative Finance ISA, stocks & shares ISA but not to Lifetime ISA or Junior ISA.
For example, if you put in £10,000 into cash ISA in the current year, you will be left with £10,000 to invest to reach your annual £20,000 ISA allowance.
Then if you were to withdraw £2,000, you would still have £8,000, so you can put back the £2,000 and get your funds back to £10,000 in the current tax year.
Remember that you cannot carry the unused ISA allowance to the new tax year. Regardless of how much allowance is left, it resets back to the yearly limit again on 6th April.
Here is an example of how you can use your ISA allowance:
|Cash ISA||Stocks & Shares ISA||Total ISA|
How you use your annual is up to you. You can split the money between a different mix of ISAs or invest the whole amount into one ISA. For instance, you can invest £4,000 in a Lifetime ISA, £5,000 in a cash ISA and the remaining £11,000 in stocks and shares ISA.
The tax starts on 6th April and ends on 5th April. So the deadline for you to add money is by midnight of 5th April.
How many ISAs can you have?
There is no particular limit for the number of ISAs you can have overall. However, you can only pay into one type of each ISA every tax year. But, there are limits on some ISA types. You can hold several types of ISAs including cash ISAs, IFISAs, stocks & shares, and Lifetime ISAs, and pay into one ISA every year.
How many ISAs can you pay into each year?
Other than the limitation on the number of funds you can pay in ISA each year, there is another restriction. You can only pay into one of each type of ISA in the same year. This means you can put money into one cash ISA account, one Innovative Finance ISA, Lifetime ISA, and one stocks & shares ISA. The Lifetime ISA is exempted from this rule, no matter whether you have a cash ISA, Lifetime ISA, and stocks & shares ISA.
If you have already put money, let’s suppose in cash ISA and find a better interest rate on the market, you can still benefit from it by moving your ISA savings to a new ISA provider. If you transfer money saved in past tax years, you can select to transfer all or some of it to the new ISA without affecting your annual allowance for the current tax year. But, in order to transfer the money you have put into ISA in the present year, you have to transfer all of it. Just remember to check with your provider if they allow ISA transfers.
* The information on this page is not advice. always ask financial experts for advice if you aren’t sure about your investment choices. Tax rules for ISAs may change over time and the benefits also depend on circumstances.