A newbie ISA Q?

astravanman

I think I understand how ISA's work but just have one question if anyone can please clarify. From what I've read I understand you can only have one ISA in any current tax year, but can transfer existing years. If I open say an easy access ISA I can add funds to it at a later date providing I don't go over the allowed limit. If so how does this work for fixed rate ISA's? If I don't invest the full allowance and they don't allow adding any more to a fixed rate ISA, can I open another ISA to add additional funds at a later date (still within the yearly allowence) or am I limited to the amount initially invested in the fixed term until the next tax year? Thanks.

Lokolo

You are limited to the amount initially invested and would lose the rest of your allowance as you cannot top it up anymore (assuming the fixed term ISA only does allow one deposit).

However, your statement about only having one ISA is slightly incorrect, you can only deposit into one ISA at any one time. So if you open ISA A with e.g. HSBC, you deposit £1000 into this. You can transfer it to ISA B e.g. Barclays and continue to top up with the rest of your allowance.

Obviously if ISA A was a fixed rate ISA there would likely be penalties for transferring out before the end of the term.

astravanman

Thanks for that, I think I understand now. So you can only subscribe to the one ISA and if it's fixed and doesn't allow further deposits then whatever you invest initially is your limit, unless transfer but with penalties as it's fixed term. So basically the fixed term is only beneficial if you deposit the max or know you won't add to it later.

Lokolo

That is correct. I tend to use non-fixed term ISAs for current years subscriptions, then fix (if appropriate) any previous years ISAs.

Vortigern

I think M&S Money (and possibly others) will allow to to split your current year subscription between their fixed and variable products. This is not a recommendation - I'm just pointing out that it's possible, if your ISA provider allows it.

http://bank.marksandspencer.com/save-invest/cash-isa/overview/