ISA

Confused_61

I will have a lump sum to invest of £40k in February. I am a little confused over which ISA account to use. I may need access to some of the money. Would i be right in thinking that i can invest £20k in an ISA in February for the current tax year which will run until February 2025 and then i can invest the remaining £20k in an ISA from the new tax year from 6th April 2024.I would be looking to have access if needed from one of the ISA's only

eskbanker

Sort of - you can indeed put up to £20K into cash ISAs in each tax year, but if you do so next month then it would only 'run until February 2025' if you specifically chose to open a one-year fixed one, and there are plenty of other options available.  You can also fund the same ISA before and after the change of tax year, so don't need to split them up unless you wish to, but yes, you can have a fixed one and a variable one if you choose to do so.

Unless you're likely to be paying tax on interest from taxable non-ISA savings accounts, cash ISAs may not be better than taxable accounts, so study rates closely, bearing in mind your tax position....

Albermarle

There are different rules for Cash ISA's in general and for the types of Cash ISA savings accounts.

You can not add more than £20K in new money to any type of Cash ISA in any given tax year.

There are different types of Cash ISA, such as easy access, fixed term, notice accounts etc .

So you can add £20K to any type of ISA account before April 5th and another £20K from April 6th.

Which type of cash ISA you save in is up to you ( easy access, fixed term ) Be aware that most fixed term accounts only allow you to add money within a set period after you open it.

If you read through the forum you will see lots of very similar questions and  answers, so could be a useful exercise for you.

Ocelot

You can, indeed, put 20k into an ISA now, for the current tax year, and another 20k after 6th April (assuming you haven't already paid money into an ISA in the current tax year).

However, the 1st ISA won't 'run until Feb 2025' (unless you put it in 1 one year fixed rate). Whatever ISA you put it in the interest you earn on the amount will remain tax free indefinitely (or until you withdraw it, or the ISA rules change).

At any point in the future you can transfer the ISA to another provider, retaining its tax free status (maybe another provider offers a better rate). The only caveat being that if you transfer an ISA in a fixed term out before the end of its term, you will have to pay a penalty.

It might be advisable to open a fixed rate ISA for this tax year (before rates drop even further), and open an easy access ISA for next tax year, if you require access to some of the money (or even put next year's money in an easy access non-ISA account, which will pay more, but be potentially liable to tax).