Isa questions answered: How many can I have?

Has it been a long time since you paid attention to Isas? You don’t remember all the rules and restrictions regarding deposits, withdrawals and money transfers… Don’t worry, you are not alone.

Many of us fell in love with these tax-free accounts when the rates were cut to the bone. A fuzzy memory for details is normal for the course.

Here, we take you back to the Isa school for a refresher course on how accounts work…

Back in frame: Many of us fell in love with Isas when rates were cut to the bone – but with rates now climbing back to 3%, they should be on every savers’ radar

How many Isa can I have?

You can save in only one Isa in cash and only one Isa in stocks and shares per tax year (beginning on April 6 and ending on April 5 of the following year).

Typically, this means you won’t be able to open more than one type of cash product, even if it’s from the same vendor.

This may surprise people who open a fixed-term Isa, for example, with less than the full allowance, then try to deposit the rest elsewhere later in the year.

In this case, the only way to maximize your allocation for that tax year is to open another type of Isa – a stock and shares Isa, for example.

However, a small group of vendors will allow you to open several different types of Cash Isa with them. These transactions are known as Portfolio Isas.

Typically, Wallet Isas allow you to deposit money into a Fixed Rate Isa and an Easy Access Isa without breaking Isa rules. In effect, you receive a single Isa “package” and can divide the money in it as you wish.

But not all ISA providers operate Portfolio accounts. So check carefully before proceeding.

Can Isas be joint accounts?

No, you can have an Isa in a single name. But you can inherit the Isa allowance from your spouse or civil partner if he dies. In addition to your normal Isa allowance, you can add a non-taxable amount up to the value they held in their Isa.

How can I transfer Isas to cash to get better rates?

That should be easier than switching non-Isa savings accounts, says Anna Bowes, co-founder of rate-watching website Savings Champion.

But there is one key rule you must follow to maintain tax-exempt status: you must not cash in your Isa yourself.

Instead, you need to go to the new provider you want to switch to, complete their application and Isa transfer form, and let them do the work.

They will make the request to your current provider and everything will happen seamlessly without further intervention from you. You do not need to inform your old supplier. The whole process should take no longer than 15 business days.

Can I transfer my Isa shares in cash?

In the past, it was not possible to transfer money from a stock Isa to a cash Isa, says Clare McCarthy, Certified Financial Planner at The Private Office.

Savers could only transfer money the other way – from cash to stocks. But the rules have changed and it’s simple to go either way.

As with the transfer from one Isa fund to another, you must always ask the new service provider to make the transfer for you.

This shouldn’t take longer than 30 calendar days. Don’t be tempted to withdraw the money and transfer it yourself.

However, a small group of vendors will allow you to open several different types of Cash Isa with them. These transactions are known as Portfolio Isas

Are there any restrictions on switching?

If you want to transfer money that you have invested or saved in the current tax year, you must transfer everything – otherwise you will break the Isa rules of having only one Isa of each type at the during a tax year.

For the money you deposited in an Isa account in previous years, you can choose to transfer some or all of it.

What if I go over the limit?

Anna Bowes says, “Mistakes happen, but you will be found out.

“So it’s important to keep clear notes of how much you paid your Isa each tax year and with whom.”

Keep in mind that transferring old Isas to a new account does not count towards your allowance.

The £20,000 limit only applies to sums paid from outside an Isa that tax year.

There are four different types of Isa for adults: the Isa in cash, the Isa of stocks and shares, the Isa of innovative financing (loan between peers) and the Isa for life.

You can open one of each per tax year. But the total amount deposited into each must not exceed the annual Isa allowance of £20,000.

Ms Bowes says: ‘Your Isa provider will notify HM Revenue and Customs of any funds added to your Isas, so if you breach the allowance or open more than one type, they can identify which account has flouted the rules and begin the process of sorting out the mistake .’

Any money deposited into the Isa in error will not be exempt from tax and will be returned to the saver.

Can you replace the Isa money withdrawn?

Previously, if you took money out of an Isa, you couldn’t put that money back in without it counting towards your current annual Isa subscription.

Now the rules allow you to withdraw money and replace it in the same tax year – whether it’s an old Isa or your current tax year’s Isa without using your allowance. However, this perk is only available on a “Flexible Isa”.

And not all Isa accounts – whether cash or stock and stock – fall under this description.

So check with your Isa provider before you act.

See the best Isa cash rates in our savings tables