How many ISAs can I have, and what are the different types of ISA?
Contributions to all of the ISA types described below count towards the individual's annual ISA allowance. As a reminder, JISA contributions do not count towards an individual's annual ISA allowance.
You are able to open and contribute to more than one of each type of ISA in any tax year (excluding Lifetime ISAs and Junior ISAs).
If you choose to contribute to multiple ISAs in a tax year, make sure you don't exceed the £20,000 annual allowance (or £9,000 annual allowance for JISAs).
Stocks & Shares ISA
You can invest directly in shares, bonds and other eligible securities in a Stocks and Shares ISA. You can also invest in funds which hold shares or bonds, which can provide benefits such as diversification.
J.P. Morgan Personal Investing offers a managed Stocks and Shares ISA, in which we invest your cash in a portfolio of funds based on your financial goals and risk appetite. The value of your investments can go up as well as down.
A general rule for any type of investment in equity or bond markets is that the investor should expect to leave the funds alone for at least 3-5 years. Investment returns in a Stocks and Shares ISA – whether from dividends, interest or capital growth – are generally free from UK income tax and capital gains tax. However, any capital losses realised in an ISA are also ineligible to offset capital gains liabilities. More information is available here.
Cash ISA
A Cash ISA allows you to save cash in an account which earns tax-free interest, usually with a bank or building society, on which the saver will pay no tax. This is one of the key differences between general savings accounts and ISAs. Interest generated in a savings account may attract tax if it exceeds your annual allowance.
For the current tax year, the personal savings allowance for basic rate taxpayers is £1,000 and for higher rate taxpayers it’s £500. Above this amount, you will pay tax at at your usual rate of Income Tax.
Lifetime ISA (LISA)
The LISA was introduced by the UK government with the specific goals of encouraging saving towards either purchasing a first home or towards retirement.
The LISA can be opened by those aged 18 to 39 who reside in the UK, and you can pay into it until you are 50. If you are not a UK resident, it is also available to members of the UK armed forces or Crown servants (for example diplomatic or overseas Civil Service) and their spouse or civil partner. Contributions into a LISA – up to an annual allowance of £4,000 – benefit from a 25% government bonus (up to £1,000), which is automatically added to your LISA. There are, as with ISAs, both Stocks and Shares LISAs and cash LISAs and you can hold a combination of both.
J.P. Morgan Personal Investing provides a Stocks and Shares LISA, but does not offer a cash LISA.
You can continue paying into a LISA until your 50th birthday, but you can keep it active until you retire or buy your first home. You can access the money in your LISA to buy your first home worth up to the value of £450,000, or once you’re 60, as well as if you’re terminally ill with less than 12 months to live. If you need to use it for reasons outside these criteria, you’ll have to pay a government withdrawal charge of 25% of the value of the withdrawal. This may mean you get back less than you contributed. You can only pay into one Stocks and Shares LISA or one Cash LISA per tax year.
Innovative finance ISA (IFISA) – IFISAs are a type of ISA that allows investors to hold long-term, less-liquid investments, and cash. Contributions to IFISAs count towards your £20,000 annual ISA allowance. J.P. Morgan Personal Investing does not offer this type of ISA.
Innovative finance ISAs are generally considered as more suitable for more experienced investors as they invest in peer-to-peer loans and are considered higher risk.
Junior ISA (JISA) – A JISA is a tax-free savings account set up by a parent or legal guardian for a child. Government guidelines state the child needs to be below 18 to open a JISA. The J.P. Morgan Personal Investing JISA can only be opened for children below 16 years of age. Anyone can contribute to the account, but only the child can access the money – and only after they turn 18. All contributions are gifts that are non-refundable.
The account holder pays no UK tax on investment returns within the JISA. You can read more about JISAs here.
Risk warning
As with all investing, your capital is at risk. The value of your portfolio with J.P. Morgan Personal Investing can go down as well as up and you may get back less than you invest. Tax rules vary by individual status and may change. This is general information, not personalised tax advice. ISA/JISA/LISA eligibility rules apply. If you choose to opt out of your workplace pension to pay into a Lifetime ISA, you may lose the benefits of the employer-matched contributions. Your current and future entitlement to means-tested benefits may also be affected.