Yes, your ISA allowance can be split between Cash ISAs, Stocks and Shares ISAs and Innovative Finance ISAs. Although you may prefer to consolidate them – you can have multiple ISAs from different years. There are many types of Stocks and Shares ISA to choose from, but some investors are turning to the greater potential security offered by the Innovative Finance ISA.
There is no limit on the number of ISA accounts you can have overall, but you can only subscribe to one of each type of ISA each tax year. This means that it would be possible to amass dozens of different ISAs by opening a fresh set of ISAs each year.
In practice, you might prefer to be more selective.
Of course, like any other financial product, the best returning ISAs will not be the same each year. But you do not need to content yourself with the performance from an ISA which has had its day.
Once your money is inside an ISA, you should be able to move it to another. So, if you have spent a few years funding a particular ISA from one provider and see a better rate on the market, you may still be able to take advantage of it by transferring your ISA funds. If you're moving money saved in previous tax years, you can move all or part of it to a new ISA without affecting your allowance for the current tax year. However, if you want to move money you've paid in the current tax year, you must move all of it.
Not all ISAs accept transfers, so be sure to check that you can actually switch to the ISA you want before you apply.
This also means that you can transfer your money into another type of ISA altogether. So, for example, transferring your savings from a Cash ISA into a Stocks and Shares ISA may give you potential for better returns, while retaining ISA tax protection for your money - although it will mean your savings become an investment, and will therefore be at risk. You could also transfer your funds from an underperforming Cash ISA to an Innovative Finance ISA and enjoy the prospect of better returns and of better security for your funds. However, your capital will be at risk as a result.
But while some will offer much better rates than others, which could make them a better choice for you and your ISA allowance, others – especially Stocks and Shares ISAs might offer very different risk profiles. You may want to build a portfolio made up of various types of ISAs to offer the combination of risk and return that suits your plans and attitudes to investment.
In general terms, you can open one of each type of ISA in any one tax year, which runs from April 6th one year to April 5th the next.
In practice there are some slight complications.
So, if for example you have taken out a Cash ISA in a previous tax year, but you continue to pay into it after April 6th, it is counted as your Cash ISA for the current tax year. You can’t then open or pay into a second Cash ISA.
One or two Cash ISA providers let you take out more than one Cash ISA in the same tax year without breaking HM Revenue and Customs’ rules. It’s possible because they operate an ‘umbrella’ system, which means that they bundle together their Cash ISAs under one umbrella. This can be useful if you want to take out a fixed-rate Cash ISA but don’t have enough money at the beginning of the year to make use of your full ISA allowance.
However, although you can only contribute to one of each type of ISA in a particular tax year, there is nothing to stop you taking out a Cash ISA, a Lifetime ISA, a Stocks and Shares ISA and an IF ISA at the same time.
You can only subscribe to one of each type of ISA in the same tax year i.e. a stocks and shares ISA. After the deadline your allowance refreshes, so it’s important to think carefully about how you use this allowance before the end of the tax year. This means that it would be possible to compile several stocks and shares ISAs by opening a fresh set each year.
Paying no tax on the returns your money earns increases how much it can grow and how fast it can mount up. All ISAs have this tax advantage, but they work in different ways – you can create a balanced ISA portfolio by splitting your annual ISA allowance across some, or all, of the three main types of ISAs.
How you use this allowance is up to you. You may want to put part of it into a Cash ISA where you can enjoy a predictable return, and use the rest in a more rewarding way in another type of ISA, such as a Stocks and Shares ISA, or an Innovative Finance or IF ISA although your capital will be at risk. This is made easier as the rules allow you to split your allowance between different providers as you wish and look for the top performers in each category. So, even if you have already put some of your ISA allowance into a Stocks and Shares ISA from another provider, there is nothing to stop you putting the remainder into an IF ISA from RateSetter, capital at risk.
Please note that tax treatment depends on individual circumstances and may be subject to change in the future. ISA rules apply. Capital at risk. No FSCS protection.