Can I set up an ISA for my partner? The easyMoney experts explain

Setting up an Individual Savings Account (ISA) for your partner

ISAs are a great way to save because of their tax-free status and everyone gets an individual allowance. While you can’t open an ISA for someone else, unless it’s a child, there are benefits of having your savings in one if you are married or in a civil partnership. 

When it comes to choosing an ISA, depending on your circumstances, your goal should be earning the highest rate of interest possible and getting the best return on your investment.

In the last few weeks, following the mini Budget and with interest rates rising, many financial institutions have upped their interest rates. 

Yet still one of the best ways to secure high interest rates is via an investment. For example easyMoney IFISA rates range between 4.03% and 8.00% – a rate far higher than you would get with a cash account.   

Here we look at how an ISA can help with investment planning, how they work between partners, and the tax breaks available.

What is an ISA?

First things first, an ISA, or individual savings account, is a vehicle for your savings. It’s a product to use in your personal finance or wealth management plan and any interest you earn will be tax free. Everyone (only if they are resident in the UK and have a NI number) gets an annual allowance, which is currently £20,000. 

There are several different ISAs to choose from, depending on what you’re saving for. You could go for a cash ISA account, a stocks and shares ISA or an IFISA if you’re looking to invest in P2P lending. 

Can you open a joint ISA?

No, individuals are given their own ISA allowances and unlike with other types of accounts, such as current accounts, loans, or a mortgage, you can’t open a joint ISA.  

Easy access ISA savings account or fixed cash rate ISA?

There are lots of ISAs to choose from and the best one for you will depend on your own financial situation. 

You can choose from the following:

• Junior ISA: If you’re saving for a child you can open a JISA. Choose from either a cash or investment JISA (you’re likely to get a higher return in the latter), and your child will have control of the account when they turn 18.

• Cash ISA: These work in a similar way to standard savings accounts, although interest is tax free. Choose from an easy-access or fixed-rate cash ISA depending on how long you want to lock your money away for.

• Lifetime ISA: A relatively new player in the ISA market, they are designed for those saving to buy a first home or for your retirement accounts. The government will top up any savings by 25% (up to a limit of £1,000 a year). 

• Stocks and shares ISA: You’ll be given your annual allowance but with one of these ISAs you’re investing the money into the stock market. Returns are usually higher than with a cash account but also riskier.

• IFISA: You’ll get all the benefits of an ISA here as you’ll be putting your money into a peer to peer lending account. A major benefit of an IFISA is the fact returns can be as high as 8% (with easy Money’s Innovative Finance ISA) depending on your status and amount you invest, plus you have a tax break, but as with any kind of investment - they aren’t guaranteed. 

How can couples take advantage of ISAs?

Although you can’t open a joint ISA, unlike with a loan or mortgage, if two people use their ISA allowances it’s still a great money saving trick because it can give their joint finances a helping hand and can be a great way to boost investment potential. 

By taking advantage of both allowances this effectively gives a couple the financial independence of having their own accounts plus a higher allowance for their joint savings. 

So, instead of choosing a joint savings account for example or just one person opening an ISA, with two ISAs the couple has a £40,000 annual tax-free allowance. 

To find out how much of a return on your investment you could make, there are lots of free finance calculators to use. These can show you the potential return you could make and are a useful tool for investment planning. 

What are the other benefits of an ISA between couples?

Aside from potentially saving more, there is another benefit of having an ISA if you’re married or in a civil partnership. If one person dies, the surviving partner can inherit their ISA allowance. 

This is a financial services rule known as the Additional Permitted Subscription (APS) and it won’t affect the surviving spouse’s allowance. If, for example, one person has an ISA worth £80,000 when they die, the remaining spouse can inherit this. 

It will be in addition to their annual £20,000 allowance so they will be able to put £100,000 (£80,000 plus their £20,000 allowance) into an ISA and all the money will be protected from the taxman.

There is an exception to this rule. The rules above apply to anyone who was married or in a civil partnership to someone who died on or after December 3 2014. If the person died before 6 April 2018, the value of an ISA will remain the same as the day they die. 

However, if they died after this date it becomes a ‘continuing ISA’ and the value may rise before it is inherited. You can find out more on the individual savings account if you do on the Gov.uk website.

Don’t invest unless you’re prepared to lose all the money you invest.  This is a high risk investment.  Take two minutes to learn more. https://easymoney.com/#risks

All the facts and figures presented are accurate at the time of posting.

easyMoney is not a cash savings account. You may not get back the full amount you put in. Your capital is at risk if you invest. Peer-to-peer investments are eligible for an Innovative Finance ISA which is not a Cash ISA. They are not protected by the Financial Services Compensation Scheme (FSCS). Money invested through easyMoney is concentrated in property and could be affected by market conditions. For the same reason, instant access cannot be guaranteed. We do not offer investment or tax advice.

easyMoney is the trading name of E-money Capital Ltd, a company incorporated in England & Wales. Registered office is 5 Fleet Place, London, England, EC4M 7RD (Company No. 04861007). E-money Capital Ltd is authorised and regulated by the Financial Conduct Authority (FCA) #231680.