It is permissible to spread your yearly ISA allowance of £ 20,000 across 2 or more different types of ISA products. Note the tax year runs from April 6th to April 5th of the following year. As at the time of writing, we are in tax year 2021/2022.
The following examples are all within ISA guidelines and permissible.
Example 1
Subscribe £ 10,000 in a cash ISA with provider A on 15th April 2021
Subscribe £ 10,000 in a stocks and shares ISA with provider B on 12th June 2021
Example 2
Subscribe £ 5,000 in a cash ISA with provider A on April 6th 2021
Subscribe £ 11,000 in a stocks and shares ISA also with provider A on May 11th 2021
Subscribe £ 4,000 in a LISA account (Lifetime ISA) with provider C on November 20th 2021
What is not allowed
Whilst the above examples are all within ISA regulations, it is not permissible to subscribe to more than one ISA product of the same type with different providers, in the same tax year.
The following examples all break the One ISA per Type per Year rule.
Example 3
Subscribe £ 10,000 in a cash ISA with provider A on April 9th 2021
Subscribe £ 10,000 in a cash ISA with provider B on May 10th 2021
Example 4
Subscribe £ 7,000 in a stocks and shares ISA with provider A on April 10th 2021
Subscribe £ 5,000 in a stocks and shares ISA with provider B on January 6th 2022
Subscribe £ 8,000 in a stocks and shares ISA with provider C on April 2nd 2021
Transferring your ISA
If you have subscribed within the current tax year in, for example, a cash ISA with provider A and you now wish to open a cash ISA with provider B and utilise your remaining current year ISA allowance with them, then do not close the ISA account with provider A and open a new ISA with provider B.
There are 2 things wrong with this, firstly you will still be breaking the One ISA per Type per Year rule and, secondly, the assets held within the ISA wrapper with provider A will have been withdrawn and will no longer be sheltered from taxation.
In this scenario, the correct approach is to transfer your ISA with provider A to provider B. To do this, you approach the new provider B advising them that you wish to open an ISA account and transfer in another ISA held with a different provider.
This process merely requires you to complete a transfer form with your new ISA provider, whom will contact the ceding provider on your behalf and arrange for the transfer of the cash or assets held by the old provider.
Any current year subscription you made with provider A will now be considered to have been made with provider B. In fact, when provider A makes their yearly report to HMRC of current year subscriptions, they will report that the subscriptions you have made with provider A as being subscribed with them.
What to do if you have broken One ISA per Type per Year rule
I’d suggest you firstly advise the provider of the 2nd ISA you have subscribed with, that you have already subscribed in the current tax year with another provider in the same type of ISA product.
They may be willing to void your subscription and remove the subscription monies (or any assets purchased with those funds, if it is a stocks and shares ISA). Though, HMRC’s advice to ISA providers is to not void a subscription under these circumstances and await advice from HMRC
If you have a flexible ISA with either provider, you could withdraw your current year subscriptions with them. This will essential self-repair the breach as flexible ISA providers report subscriptions less withdrawals to HMRC, hence if you withdraw all your current year subscriptions, then that provider will report zero subscriptions for you in their annual return to HMRC.
If you take no action, once HMRC are aware of the breach of the One ISA per Type per Year rule, they may approach one of the providers and ask them to void their subscription. Note, ISA providers report tax year subscriptions to HMRC on June 6th. Hence, for subscriptions in tax year 2021/2022, providers will report to HMRC on June 6th 2022.
Please be aware such breaches of ISA regulations, including oversubscribing your ISA are not criminal offenses and the worse likely outcome is that one of the ISA accounts will have that year’s subscriptions voided, and the provider will return those funds to you.
If you do have any concerns, then you can also contact the HMRC Savings helpline on 0300 200 3300.