Can You Have More than One ISA at the Same Time?
(Capital at risk - Past performance is not an indicator of future results. 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. Please note that the parameters contained in this blog are subject to change as our business evolves).
Today’s blog is about mixing things up: your Individual Savings Account (ISA) portfolio, that is. Have you ever wondered if a combination of ISAs is a good idea, and how it all works? What you can, and can’t do? Which ISA could perform best for you? Here’s your hot-off-the-press guide to ISAs from the team here at easyMoney.
We’ll go into the pluses and minuses later, and in particular in relation to the IFISA offered by easyMoney, for you to make some comparisons. Your capital is at risk and not covered by the Financial Services Compensation Scheme (FSCS). Please always take independent advice before you invest.
So, Can you hold more than one ISA, and how many can you have?
The short answer is yes, but you can only open ONE of each type of ISA in each tax year – although you can have several “old” ones with different providers. This means, you can have a cash ISA, stocks and shares ISA, an Innovative Finance ISA and a Lifetime ISA at the same time.
In addition, you can transfer all or part of your existing ISA monies into a new account in order to get a better target interest rate, as well as open a new account for the current year (up to £20,000).
But let’s go back to basics a little here, to put everything in context for you.
Quick History of ISAs
Individual Savings Accounts were launched by the government in 1999 to replace Personal Equity Plans (PEPs) and Tax-Exempt Special Savings Accounts (TESSAs). Every year, investors and savers get an annual ISA allowance, currently set at £20,000 since 2017/18. This means any interest you earn is completely free from tax.
There are currently 4 main types of ISAs for adults. Here’s a brief description of each, along with the current state of play:
Cash ISAs
In effect, regular savings account with tax-free interest. Nevertheless, its value may be eroded if the interest you gain is lower than the rate of inflation. And, given that 75% of ISAs are cash products (see Times reference below), where are we now?
In a nutshell, potentially not in a good place. Given that the current inflation rate is 2.1% (https://www.bankofengland.co.uk/monetary-policy/inflation) and the average rate of return for cash ISAs is now at an all-time low median of 0.24% (https://www.thetimes.co.uk/article/50bn-pours-into-cash-isas-but-returns-are-at-rock-bottom-c9j2qwk0q), it doesn’t take much to work out that inflation is posing a substantial threat to cash ISA investors.
Stocks and Shares ISAs
This ISA enables you to invest in a range of funds, bonds and company shares, again using your tax-free allowance. Aimed at investors with a longer-term view, and those happy to take a degree of risk, it goes without saying that the volatile nature of the market could dramatically affect returns. In fact according to The Times the total saved in these types of ISAs dropped 3 per cent from 2019 to April last year.
Lifetime ISAs
A Lifetime ISA can only be used for either buying your first home or for paying for your retirement. You will need to be aged between 18 and 39 to qualify. With regard to retirement, you could benefit from a 25% bonus on deposits of up to £4,000 each year. However, you will not be able to access these funds until you reach 60 unless you pay a 25% penalty on your withdrawals.
And don’t forget – you can only invest up to £4,000 a year, leaving you £16,000 to put into another type of ISA.
For example:
IFISAs
Introduced in 2016/2017, Innovative Finance Individual Savings Accounts are, in our view, innovative – hence their title. Whilst they hold the name “ISA” they’re not cash savings accounts. Instead, an IFISA enables you to lend money on a peer-to-peer basis inside your £20,000 tax-free “wrapper”.
Any interest you earn from loan repayments will not be taxed by the government. Plus, your interest payments are paid monthly and can either be withdrawn to your bank account or re-invested.
Please note your capital is at risk and you're not covered by the Financial Services Compensation Scheme (FSCS).
Read on for some easyMoney good news.
The easyMoney Approach
To be specific, the P2P lending platform from easyMoney focuses on loans backed by UK property.
The Good News
With your capital at risk, an IFISA from easyMoney could deliver a target rate of between 3.67 to 8% p.a.
Given our expertise in property and our approach to lending, easyMoney has never made a loss on any of its loans. Knowing and understanding our subject matter in-depth offers, in our opinion, a safe pair of hands to our investors. That said you should always seek independent financial advice before making a decision. Capital at risk - Past performance does not guarantee future results. Funds are not protected by the Financial Services Compensation Scheme (FSCS).
There are 4 investment levels (Classic, Premium, Premium Plus and High Net Worth) with investments starting as low as £100 and up to £100,000+.
Get in touch to find out more. Whilst the experience and knowledge that lies behind your future investments with easyMoney is in-depth, becoming a part of the easyMoney family is, well, easy.
Regarding diversification, you can hold an IFISA alongside other ISAs, provided that the total you invest in one year does not go higher than £20,000. Additionally, you can only pay into one IFISA in each tax year, although you can hold several previous years' IFISAs at the same time.
Or, you can put the entire amount into one ISA, it’s up to you.
In summary…
The easyMoney team recommends that you weigh up the pros and cons of the various ISAs available. Please think about your financial goals and seek independent advice before any investment.
Perhaps getting in touch with us could be a good start?
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.