Author Topic: I opened both a LISA and ISA this year, and am investing into both. That okay?  (Read 1423 times)

MrOnyx

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I'm sorry if this gets asked a lot.

I understand that it is okay to open more than one ISA in a year, but you may only pay into one of them in a given year - the other should be left untouched (if I understand correctly). Now, does the same apply to the Lifetime ISA? I'm guessing that it's okay to invest into both in a given year, because the 4k limit of a LISA counts into your 20k limit overall, so I believe that it's okay to invest into both.

HOWEVER. I may have missed something. The reason I think this is because logging into either of my accounts (one at Hargreaves Lansdown, the other at Vanguard UK), reveals a 'remaining ISA limit' - telling me how much more money I am permitted to save before next April. The problem is that neither value I am shown seems to take the other into account. I have so far invested 650 into my Vanguard ISA, and it tells me my remaining allowance is 19,350. That would be fine, except I've invested more money into my HL LISA, meaning my actual allowance should be lower than that.

Is this normal, or was I supposed to link these accounts/inform someone that they are owned by the same person? I mean I had to enter my NI number both times, so I'd like to have thought that something would have pinged on a database somewhere and made the link for me.

It's an innocent mistake if this is wrong, and the last thing I'd want to do is cause any grief for this, so in the event of an error, I'd rather 'come clean', admit my error and make amends rather than be 'found out' - because the latter makes it seem more malicious than it actually is.

Thanks!

AnswerIs42

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It is indeed fine to pay into both a LISA and a normal ISA in the same tax year, as long you don't go over 4k for the LISA and 20k in total.

Is this normal, or was I supposed to link these accounts/inform someone that they are owned by the same person? I mean I had to enter my NI number both times, so I'd like to have thought that something would have pinged on a database somewhere and made the link for me.

HMRC will use your NI number later to make sure you haven't exceeded the limits, but there's no link between HL and Vanguard. Each is calculating the remaining limit on the assumption that you're not investing in another ISA anywhere else. If you're doing what you're doing, then ignore the "remaining allowance" numbers, you've got to make sure you don't exceed the limits yourself.


MrOnyx

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It is indeed fine to pay into both a LISA and a normal ISA in the same tax year, as long you don't go over 4k for the LISA and 20k in total.

Is this normal, or was I supposed to link these accounts/inform someone that they are owned by the same person? I mean I had to enter my NI number both times, so I'd like to have thought that something would have pinged on a database somewhere and made the link for me.

HMRC will use your NI number later to make sure you haven't exceeded the limits, but there's no link between HL and Vanguard. Each is calculating the remaining limit on the assumption that you're not investing in another ISA anywhere else. If you're doing what you're doing, then ignore the "remaining allowance" numbers, you've got to make sure you don't exceed the limits yourself.

Brilliant. Thank you so much for your response. Good to know that it's normal for the numbers to not be 'linked' as I expected. This puts my mind at rest. Shouldn't be too hard to stay under the limits! Cheers.

FIFTWUK

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Out of interest, by the same logic, could you pay into a couple of ISA accounts?
The reason I ask this is because one of my ISA providers asked me to confirm at the start of the financial year that I'm happy to use my ISA allowance with them.

Thank you.

MrOnyx

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Out of interest, by the same logic, could you pay into a couple of ISA accounts?
The reason I ask this is because one of my ISA providers asked me to confirm at the start of the financial year that I'm happy to use my ISA allowance with them.

Thank you.

From my understanding, you may only open and/or pay into one cash ISA, and one stocks and shares ISA in a given year, if we are talking about regular ISAs, not combinations of ISA and LISA.

Say you owned 3 ISAs of the same type (cash or S&S), A B and C. If you choose to pay into ISA A in a tax year, you may not put any money into ISAs B or C. But, if my understanding is correct, you CAN still move money between all three ISAs.

If I've gotten any of this wrong and someone with more experience happens to chime in, I'm happy to be corrected, but this is the information I have garnered from reading FAQs and forums on the topic from money experts.

ETA: To be honest with you, my LISA and ISA are both S&S types. I see no reason to have a pure cash ISA or LISA, because even if you didn't want to invest all of your savings, you can hold cash in a S&S ISA - it doesn't have to all be invested and indeed you should keep a little aside to pay for costs anyway. Plus, given that this is a MMM forum, I should imagine most of us are gunning for them index funds anyway, right?
« Last Edit: July 26, 2018, 03:26:08 AM by MrOnyx »

AnswerIs42

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That's right, you can only pay into one cash ISA, one S&S ISA, one LISA, and one IFISA every tax year; and transfers don't count as subscriptions.

As I understand it, it's subscriptions that count rather than account opening, so if you haven't actually paid in any money to the provider you mention this tax year (and you make sure you don't) then you should be OK paying into a different ISA.

londonstache

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That's right, you can only pay into one cash ISA, one S&S ISA, one LISA, and one IFISA every tax year; and transfers don't count as subscriptions.

As I understand it, it's subscriptions that count rather than account opening, so if you haven't actually paid in any money to the provider you mention this tax year (and you make sure you don't) then you should be OK paying into a different ISA.

Agreed. The first time you add money to an existing ISA account in a new tax year you should be asked if you want to make a new subscription.

You could feasibly have 10 years of ISA subscriptions with 10 different providers and therefore 10 separate accounts. Whether you would want to is an entirely separate question!

Playing with Fire UK

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Out of interest, by the same logic, could you pay into a couple of ISA accounts?
The reason I ask this is because one of my ISA providers asked me to confirm at the start of the financial year that I'm happy to use my ISA allowance with them.

Thank you.

This is rather cheeky of them. It sounds like they are trying to lock you in unnecessarily in case a better offer comes from another provider.

MrOnyx

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Out of interest, by the same logic, could you pay into a couple of ISA accounts?
The reason I ask this is because one of my ISA providers asked me to confirm at the start of the financial year that I'm happy to use my ISA allowance with them.

Thank you.

This is rather cheeky of them. It sounds like they are trying to lock you in unnecessarily in case a better offer comes from another provider.

Hadn't thought of it like that. Though now you bring it up, I wonder why the only-one-ISA rule was set as such in the first place. To make it easier to calculate everything for the Government come April?

Probably not important from our point of view where all we have to do is save money and make sure we know the rules well enough to follow them, but I can't help but wonder all the same.

MarcherLady

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Hadn't thought of it like that. Though now you bring it up, I wonder why the only-one-ISA rule was set as such in the first place. To make it easier to calculate everything for the Government come April?

Probably not important from our point of view where all we have to do is save money and make sure we know the rules well enough to follow them, but I can't help but wonder all the same.

Lol it certainly isn't easier for the providers. Each April all ISA providers have to send in a return to HMCR of all accounts  that were open at any time during the previous tax year. Including NI numbers, balances, subscriptions, withdrawals, closures etc.  Ditto for Junior ISAs.

The Revenue then ingests all that data and xrefs it to ensure that limits haven't been breached, people haven't subbed into more than one (barring the caveats as mentioned above) etc etc.Huge pain in the arse for everyone concerned.

If someone has subscribed to an account they should not have then the provider has to close the account and refund the balance to the customer.

I think that the rationale for the one ISA only rule was that the providers could 'police' the subs limit, by rejecting any excess subs in the year, and if a customer opened two accounts it would be easy to work out which account was opened second and just close that one, whereas if you were allowed multiple accounts, the providers couldn't police the limit and it would be much harder to unpick subs breaches across accounts later on.

I haven't worked in the ISA industry since before the LISA was introduced and I'm very glad to be out of it, that must add a huge headache to manage.