HMRC clarifies ISA allowance rules for saver with multiple accounts | Personal Finance | Finance

HMRC has explained how the rules around ISA allowances work after a person asked how the system works.

A saver got in touch with the Government department over X to ask about depositing funds into several ISAs.

They queried: “Can I pay into a stocks and shares ISA and stocks and shares LISA at the same time as long as the contributions are less than £20,000?”

A representative of the tax authority said in response: “A Lifetime ISA is classed as one type of ISA (whether it’s a cash or stocks and shares LISA), so you can also pay into a stocks and shares ISA as long as your contributions are within the £20,000 allowance.”

Under the current rules, a person can deposit funds into one of each type of ISA, including a cash ISA, stocks and shares ISA, innovative finance ISA and a Lifetime ISA.

The rules are changing from the start of the new tax year in April, as savers will be able to deposit funds into more than one of each type of ISA.

There are also plans to extend the ISA allowance with an extra £5,000 that can go towards a British ISA, with the funds to be invested in UK companies.

Research from Opinium found two in five ISA savers will not use up all their ISA allowance this year, with most of this group saying they couldn’t afford to max out their allowance.

Alexa Nightingale, global head of Financial Services research at Opinium, said: “ISAs offer a generous £20,000 annual tax free allowance, which is a big incentive to encourage saving.

“However, our research shows that a significant number of ISA holders will not maximise their full allowance before April 5 this year, with the majority simply unable to save that much money.

“People are more optimistic about their ability to save the full allowance next year, but only time will tell if that happens.”

ISAs come with the benefit that all savings wrapped in them are tax free, with no tax to pay on any interest or growth in investments, and no tax to pay on any income derived from an ISA.

At the time of writing, several easy access ISAs currently pay above five percent interest.

The base rate set by the Bank of England was held at 5.25 percent in its latest decision, with experts predicting it could drop from August.

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