Help to Buy vs Cash ISA

thebeard1

I understand that a Help to Buy ISA is a form of Cash ISA, and that there are rules preventing you from opening more than one Cash ISA per year. I’m comfortable with that rule as I opened my HTB 5+ years ago. 

What I’m struggling to understand is the rule which prevents you from paying into more than one Cash ISA per year unless it’s with the same provider; as the HTB is a monthly payment then I am always paying in and then always constrained to my current provider (Nationwide). 

Is this right that I’m stuck with Nationwide if I want to keep my HTB? Their interest rates aren’t that competitive for and I don’t want to be stuck with them when there are better deals out there.

Apologies if this has been asked before. 

eskbanker

Yes, you can't pay into a cash ISA elsewhere in the same tax year that you're paying into your HTB, but (non-HTB) cash ISAs aren't usually particularly competitive anyway, and chances are you'd be able to make your money work harder with taxable accounts, as you only pay tax on the interest if you exceed your personal savings allowance....

https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/

Cheese1990

The only people who should have so much cash that they are earning more interest than their savings allowance are those buying in London with a large deposit and higher rate tax or those with a very high salary which removes their saving allowance. Everyone else should be fine as given interest rates you'd need approx 50k+ sat in cash for it to be a problem and I'd argue if you have that much at least some should be in S&S isa

Alexland

thebeard1 said:

I understand that a Help to Buy ISA is a form of Cash ISA, and that there are rules preventing you from opening more than one Cash ISA per year. I’m comfortable with that rule as I opened my HTB 5+ years ago.

There is no limit to the number of Cash ISAs you can open in a tax year - the limit is that you can only contribute new money into one per tax year. You might for example open another Cash ISA in the same year to perform a transfer of a previous tax year's ISA account.

HTB ISA is now a legacy product so have you considered if the Lifetime ISA would be more suitable? As it is a different high level type of ISA you would be allowed to contribution new money into both a Cash ISA and a cash Lifetime ISA in the same tax year up to the product and overall limits.

https://www.gov.uk/individual-savings-accounts

thebeard1

Perhaps on the basis that cash isa aren’t very competitive it would be better to go into a LISA and an S&S alongside my help to buy. 

Just mindful that interest rates could continue to go up over the next couple of years to tackle inflation which may put cash isa in a better position and I don’t want to lose out on c.18k/yr allowance of building it up if I’m just putting 2400 into the HTB. 

eskbanker

thebeard1 said:

Perhaps on the basis that cash isa aren’t very competitive it would be better to go into a LISA and an S&S alongside my help to buy. 

Just mindful that interest rates could continue to go up over the next couple of years to tackle inflation which may put cash isa in a better position and I don’t want to lose out on c.18k/yr allowance of building it up if I’m just putting 2400 into the HTB. 

Much will depend on what the money is intended for and when - if you've been saving into a HTB ISA for 5+ years but are now concerned about losing out on a £20K annual ISA allowance, then how close are you to buying your first property?

If you're planning to use the HTB ISA to support that then you can't also use a LISA (but could transfer the former into the latter if you have enough time to do so at £4K/year), and S&S is unlikely to be suitable unless you're not buying for 5-7 years or more....