HTB ISA + Cash ISA

LP10064

Hi
I've read that you can't pay into both a cash ISA and HTB ISA in the same year. Does this mean that if I open a HTB ISA now (2015/16 tax year) that I won't be able to open a cash ISA next week (2016/17 tax year) and save in both?
Thanks

Lingua

Yes. You can open the HtB this year and deposit into it, then open a regular cash ISA from the 6th April, but you can only pay into one. The HtB ISA is a cash isa (just with a different set of conditions).

However, from April 2017, the Lifetime ISA should be making an appearance, and that is not a cash ISA so you could pay into that and a regular cash ISA.

Hope this helps!

PS. some banks offer a HtB ISA plus a regular ISA in a bundle. The only downside is a lower interest rate, which is offset if you have enogh money to deposit. Nationwide offers one of these at 2% IIRC.

The top HtB ISAs, according to MSE, are Santander and Halifax at 4%


Lingua

eskbanker

Worth following the usual advice on here and reconsidering if you really want a non-HTB cash ISA anyway, as their interest rates are easily beaten by regular saver and current accounts, see http://www.moneysavingexpert.com/savings/which-saving-account for further details.

LP10064

Thanks, both very helpful. I will definitely look into opening a HtB ISA and also open up a separate savings account.

jamesd

You can pay into both a HTB cash ISA and any number of other cash ISAs in the same tax year provided all are operate by the same ISA manager. Several institutions offer this capability while many don't.

You can only have one HTB ISA with money in it at once, regardless of which year's money is involved. This restriction doesn't apply to the lifetime ISA.

So if you want HTB and cash ISA with money in the same year, pick one of the places that allows this. Past year non-HTB ISA money can be transferred to any other type of ISA.

Given the interest rates you should look for a place that offers both a HTB ISA and a flexible ISA. Then you can have the HTB money in that and use the flexibility feature to pay money in then take it out and put it into a place with a higher interest rate until just before the end of the tax year, at which point you pay it back into the ISA you took it out of.

jimjames

jamesd wrote: »

Given the interest rates you should look for a place that offers both a HTB ISA and a flexible ISA. Then you can have the HTB money in that and use the flexibility feature to pay money in then take it out and put it into a place with a higher interest rate until just before the end of the tax year, at which point you pay it back into the ISA you took it out of.

I'm really struggling to understand why anyone would want to do this? Surely if you are paying into a HTB ISA you are looking to buy a house so there is zero point in worrying about the tax status of money you will be spending on that purchase. Of more importance is getting the best return on your money to boost your deposit as much as possible which currently is not a cash ISA but regular savers and current accounts.
Obviously if you have no interest in getting the best return then a cash ISA is fine but that's not really the ethos of a money saving site.

jamesd

The money in the non-HTB cash ISA can make more money outside the ISA than inside it. But you can preserve the ISA allowance by putting it into the ISA first then using the flexibility feature.

masonic

jamesd wrote: »

The money in the non-HTB cash ISA can make more money outside the ISA than inside it. But you can preserve the ISA allowance by putting it into the ISA first then using the flexibility feature.

The trouble is the cost of doing this is that you only get half the interest rate on the HTB ISA, which is quite a steep penalty (e.g. Nationwide only pay 2% on their HTB ISA vs. 4% for the Santander or Halifax equivalent).

The best option for someone not using the other ISA types is to find a flexible provider of one of those. Zopa, for example, has committed to offering a flexible ISA when this launches.

jamesd

Zopa and their biggest competitor RateSetter have both committed to a flexible IF ISA when they are allowed to do it. Plenty of others will be doing it as well, including some interesting ones. No significant P2P player currently has the full permission required from the FCA to have an IF ISA.

A flexible S&S ISA is a route that would be possible if none of the places that allow HTB and other ISA forms produces the best combined rate.

Still, for many people I doubt that preserving the ISA allowance is going to matter when saving for a home.

masonic

jamesd wrote: »

Zopa and their biggest competitor RateSetter have both committed to a flexible IF ISA when they are allowed to do it. Plenty of others will be doing it as well, including some interesting ones. No significant P2P player currently has the full permission required from the FCA to have an IF ISA.

It's true that no "significant" P2P player will be able to offer an IF ISA from 6th April, but several smaller players will, including Assetz, apparently (link). If you don't intend to invest through the IF ISA, and won't be keeping any money in it, except for a few days between tax years, then size shouldn't be a concern. Of course, it is unclear what would happen to the ISA status of flexibly withdrawn funds if a smaller platform should go bust. But anyone saving new money into an ISA in the 2016/17 tax year has until March-April 2017 to find a provider. By that time there will surely be a few major P2P platforms in the mix.

A flexible S&S ISA is a route that would be possible if none of the places that allow HTB and other ISA forms produces the best combined rate.

I don't believe there is any significant S&S ISA provider who will offer the flexibilities in this case. Most have stated they will not.

Still, for many people I doubt that preserving the ISA allowance is going to matter when saving for a home.

Agreed, and that's exactly the point jimjames made a few posts earlier.

jamesd

masonic wrote: »

It's true that no "significant" P2P player will be able to offer an IF ISA from 6th April, but several smaller players will, including Assetz, apparently (link).

As of 31 March Assetz is prohibited from offering an IF ISA because only fully authorised firms are allowed to and it is still operating with interim permission. Whenever that changes we'll presumably see a press release and lots of space on their front page saying so.