- Reader wants to open a second easy-access Isa because it is flexible
- New rules now mean savers can open as many cash Isas as they like
- But not every provider has the option to open multiple cash Isas
I have paid some money into an easy access cash Isa this year but also want to pay into another cash Isa.
The second is a flexible Isa and I want a tax-free pot I can take money in and out of, which isn’t possible with the first account.
Can I just pay money into two cash Isas, now that the Isa rules have changed so that we are allowed to do that?
The application doesn’t seem to ask me if I have paid into another one this year.
Sky’s the limit? New Isa rules mean that savers will in theory be able to open as many cash Isas as they want
Helen Kirrane of This is Money replies: In a major shake-up of tax-free accounts, savers and investors are now allowed to open and pay into as many Isas as they like, provided they don’t exceed the limit of £20,000 for the 2024/25 financial year.
There is one exception to the rule which is the Lifetime Isa, of which you can still only have one.
Previously, savers could only open and pay into one cash Isa and one stocks and shares Isa per year.
This has now changed under rules announced by the Chancellor last November.
Not every Isa provider allow savers to open more than one account with them, though some have given savers the capacity to open multiple types of cash Isa, for example Hargreaves Lansdown and Charter Savings Bank.
It will also be up to savers to keep track of how many Isas they have opened and whether they are within their £20,000 Isa limit.
We asked two savings experts to clarify the rules.
James Blower, founder of website Savings Guru replies: You are correct, the rules have changed and savers are now able to open as many Isas as they wish, as long as they stay within the limits.
The application won’t ask if you have paid in to another Isa this year, because the onus is on the individual to keep track and stay within the limits.
In theory, savers could open an Isa every day with a new provider, but the reality is, the more they open, the more they have to keep track of and the harder it is to make sure they are staying within the allowances.
Banks have no way of knowing if you have opened Isas with other providers, and what part of your allowance you have used with them. Therefore, they can’t alert you that you have breached your allowances because of balances held elsewhere.
While HMRC have generally been sympathetic to individuals who have accidentally opened a second Isa in the same tax year historically, it remains to be seen how relaxed they are with individuals who exceed the allowance – either in in error or deliberately – this year.
My recommendation to savers is that it is definitely worth using different providers to maximise the allowance and rates, but there comes a point where this isn’t worth it.
For example, a 0.25 per cent increase in rate on the full £20,000 allowance is worth an extra £50 in interest but, if the balance is split across four Isas, then a 0.25 per cent increase on £5,000 is only worth £12.50 – so the effort maybe doesn’t justify the reward.
Anna Bowes, co-founder of Savings Champion replies: What many people may not realise is that the new changes to the Isa rules do not have to be adopted by the Isa providers. So, if anything, savers are more confused than ever about what they can and can’t do.
People should now be allowed to open and pay into multiple Isas of the same type in a single tax year. Previously people could only pay into one of each type of Isa every tax year, so for example one cash Isa and one stocks and shares Isa.
This was the case unless your Isa provider had previously adopted the ‘portfolio Isa’ rule, which has been in existence for a few years now, allowing savers to open more than one cash Isa with the same provider in the same tax year.
This has a number of names – we called it the ‘portfolio Isa’ rule – but only a small number of providers adopted it, such as Paragon, Aldermore, Charter Savings Bank, Nationwide and Ford Money to name a few.
So, the new rule is in addition to the ‘portfolio Isa’ rule and should not be confused with it.
With the new rules, savers assume that they can open more than one Isa, with either more than one provider or with the same provider.
But our research has shown that whilst many providers – though not all – will allow you to open another cash Isa with them if you have already opened and funded an Isa with someone else in the current tax year, this doesn’t mean they have adopted the portfolio Isa rule – so you may not be able to open two Isas with them.
This new rule is beneficial as it means that if you don’t deposit all of your Isa allowance initially, you can open another Isa at the best rates available at a later date if you want to. You don’t simply have to add to the one you’ve already opened.
Or, if you have opened a fixed-rate Isa with less than the full allowance but had further funds later that tax year, you are unlikely to be able to add to the Isa you have, as it will have closed to any new subscriptions.
So, being able to open another Isa with someone else is great news. However, you may not be able to do it depending on the provider’s rules.
The bottom line is that you need to check with the Isa provider that you are considering, to make sure they won’t send your funds back.