If you're wondering how many ISAs you can have, then you're not alone. The simple answer is - as many as you want. But how many ISAs can you open in one tax year? If you're over 18 years old, you can open four, one of each of the following; a Cash ISA, Stocks and Shares ISA, IFISA and Lifetime ISA.
The Individual Savings Account (ISA) has long been one of the UK’s favourite savings and investment options. Introduced in 1999, their tax efficient wrapper - which means any returns aren’t liable to income or capital gains tax - sees investors wanting to take full advantage each year.
With various rules applying to both the ISA wrapper as a whole and the individual products that fall within it, one of the most common questions asked is around the number of ISA products you can have.
Understanding your ISA allowance
Every tax year, savers and investors are given a generous ISA allowance. For the 2020/21 tax year, it’s £20,000.
Both Adult ISA (Cash, Stocks and Shares, and Innovative Finance) and Junior ISA allowances have consistently been on an upward trajectory.
The Adult ISA allowance rose from £15,240 to £20,000 in the 2017/18 tax year, where it’s stood ever since, and the Junior ISA allowance rose from £4,260 to £4,368 in the 2019/20 tax year - with an even bigger leap in 2020/21, as the Junior ISA allowance rose to £9,000. Separately, whilst the Lifetime ISA allowance hasn’t increased since it was first introduced in 2017/18, it offers a generous £4,000 allowance per year.
Clearly a generous allowance, understanding your available ISA allowance is key, as knowing how much you can invest into the ISA wrapper as a whole is just as important - if not more so - as understanding how many ISAs you can invest into.
Splitting your ISA allowance
The reason behind this is generally speaking, there’s no limit to the amount of ISAs you can have in total. If you’d opened one Cash ISA every year since 1999, you would currently have 21 ISAs - and that’s without accounting for any of the other ISA products within the ISA family.
This is all entirely appropriate, however the basic limitation is in relation to where you allocate your allowance, as you’re only able to pay into one of each type of ISA per tax year.
What this doesn’t mean, however, is that you’re restricted to having only one type of ISA each tax year, as you can split your ISA allowance across multiple different ISA products.
And this is where the real power of ISAs can become apparent.
As long as your total ISA product subscriptions don’t exceed your annual ISA allowance, you have the opportunity to reap the benefits of each ISA individually. This can be hugely powerful in many ways, such as by giving your investment portfolio a strong level of diversification by allowing you to spread your investment across a range of asset classes in order to mitigate risk.
Take Mr A as an example. He currently has £50,000 in a Cash ISA, but he’s becoming increasingly disillusioned with the low interest rates on offer. Deciding that in the 2020/21 tax year he wants to diversify within the ISA wrapper, he’s aware that Cash ISAs are the safest ISA available (as they’re a savings product, not an investment product), so he decides to keep his original £50,000 in his Cash ISA.
However, with the ISA allowance reset in April, Mr A will have an additional £20,000 to invest and as an experienced investor, he plans to subscribe £10,000 to an IFISA, investing in a property backed fixed term bond that will create jobs and provide homes in his local area. Mr A then decides to add £6,000 to a Stocks and Shares ISA, and as he wants to give his child a head start at getting on the property ladder, he subscribes his final £4,000 to a Lifetime ISA.
Read more: compare IFISA eligible fixed term bond rates
ISA planning for the new tax year
Being able to hold more than one ISA product can be hugely beneficial. Allowing investors to diversify without needing to move away from the tax efficiency of the ISA wrapper, you can split your annual allowance between a Cash ISA, Stocks and Shares ISA and an IFISA in any ratio that’s preferrable - and even invest up to £4,000 per year into a Lifetime ISA without impacting on your allowance.
Mitigating risk whilst allowing you to target returns that are more generous than many other investment options, you do need to be exposed to a certain degree of risk (excluding with Cash ISAs), but for many experienced investors, the level of risk is acceptable and directly proportional to the potential returns.
An important consideration within most experienced investor’s planning for approaching tax years is having confidence that you’re making the most of the available ISA products to directly help you develop a strong portfolio that helps you meet your wider portfolio requirements.
The MAVEN Bonds product is available exclusively to experienced investors who are classified as either sophisticated investors, high-net-worth individuals or professional investors and have the knowledge and experience to make their own investment decisions. Investments are high risk and illiquid, your capital is at risk and returns are not guaranteed. Bonds are not protected by the Financial Services Compensation Scheme (FSCS).
Originally published 12th February 2020, updated 8th April 2020.