How does the new multiple ISA rule work?

A new tax year has heralded a shake-up to how your ISA allowance works.

There are now new rules on how many cash ISAs and stocks and shares ISAs you can open within the same tax year, as first announced by Chancellor Jeremy Hunt in the Spring Budget.

The changes, which kicked in on 6 April,  mean savers who hold a cash ISA or stocks and shares ISA can subscribe to more than one of the same type within a given tax year – but there’s a catch. 

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The change is not mandatory and many major savings providers are not ready for the reforms.

So, it’s essentially up to your ISA provider if they want to implement the new rule. In previous tax years, savers could only hold one new ISA of the same type. 

In the midst of other ISA changes this tax year, this one could prove beneficial for thousands of cash ISA holders, as it means just like a traditional savings account, savers can keep on top of bagging competitive rates without the hassle of transferring funds. And it means investors can shop around for the best investment platform to host their stocks and shares ISA. 

We dive into how the new rule works, and which banks and ISA providers have welcomed the new ISA rule. 

How does the multiple ISA rule work? 

Before the 2024/25 tax year, ISA holders were only permitted to open one new ISA of the same type within a given tax year. 

If you wanted to switch over to another ISA of the same type, previously you would have had to check if your current provider would allow your funds to be transferred to the new provider – and not all ISA providers offer this. 

But, since 6 April, those who hold a cash ISA or stocks and shares ISA can subscribe to more than one in a tax year. 

Plus, there will also be a change to ISA transfers. Before 6 April, if you wanted to transfer your funds to another ISA, it would have had to be the full amount. Since the new tax year began, you can now partly transfer funds. But, you will have to check that your provider offers this. 

Whilst your £20,000 tax-free allowance remains the same, you can spread it across various ISAs providers and accounts of the same type within your limit. 

Which banks are allowing customers to take up multiple cash ISAs? 

As mentioned, it’s up to the ISA provider whether they want to take on the new ISA reforms and offer it to its customers. 

While providers have had under six months to prepare for the new ISA changes, it's expected that many will have not implemented the new rules yet. 

MoneyWeek asked the big high-street banks whether they are accepting applications from ISA holders who already hold a cash ISA elsewhere, or with them.  

So, currently only TSB, Nationwide Building Society, SBS and YBS are taking on the new ISA reform. It means between these four providers, you can open multiple ISAs of the same type. 

For example, if you have a fixed cash ISA with Nationwide, but months later you see TSB is offering a better rate, you can open a cash ISA with TSB without having to close or transfer the funds from your Nationwide account. 

Alex Sitaras, head of savings products at Skipton Building Society, said: “We’re delighted to confirm that, from 6 April, our customers will be able to split their current year’s ISA allowance across multiple different Cash ISA products. For example, for the first time they could choose to put £10k into an easy access ISA and £10k into a fixed rate ISA.”

Most other high-street banks said they are still reviewing the new ISA rules, and customers could expect changes soon. 

“We welcome the government’s reforms and support their aim to increase consumer choice and understanding of ISAs. Whilst we are not in a position to implement the non-mandatory changes right now, we will consider implementing them in the future,” says a spokesperson from HSBC UK. 

A Lloyds spokesperson also told MoneyWeek that the new ISA rules are under review “given details have only recently been shared and there are dependencies on industry-wide systems to deliver effectively.”

MoneyWeek did ask NatWest and RBS on their stance, but they have not confirmed. 

While these are the big players in the ISA market, they are known for their poor rates compared to smaller savings providers. Currently, you can earn up to 5.17% with Plum on a cash ISA, whereas an average cash ISA with a high-street bank stands around the 4% mark. 

The good news is, some small providers are open to applications from customers who already hold the same type of ISA. 

Investment firm Hargreaves Lansdown (HL) launched the first and only cash ISA platform in February, under its Active Savings platform. The platform acts as a one-stop shop for savers to take advantage of competitive rates, without the hassle of always switching.

HL offers three types of cash ISAs on its platform- easy-access ISAs, fixed ISAs and limited-access ISAs, and under the new rules, it allows savers to hold more than one cash ISA per tax year. 

Some providers on its platform don’t accept customers who already hold a cash ISA in the same tax year if you go directly to them, but if you go via the HL savings platform, you can take advantage of the new ISA rule. Currently, the platform hosts five ISA providers, including big and small players such as Zopa, OakNorth Bank and Santander. 

Savings and investment app Moneybox has also confirmed it has taken the new ISA rule on board. 

Which investment firms are taking the new rule on board for stocks and shares ISAs? 

The ISA change also applies to stocks and shares ISAs, but which fund supermarkets have welcomed the new ISA rule? 

HL told MoneyWeek: “In line with the changes to the ISA rules implemented from 6 April, clients can open/contribute to a stocks and shares ISA with HL and an alternative provider in the same tax year.”

Investment firm Interactive Investor said under the new rules, you can open and contribute to stocks and shares ISAs with other providers in the same tax year too. 

AJ Bell has also confirmed that it is allowing subscriptions to multiple ISAs.

A spokesperson from Fidelity told MoneyWeek: “In order to ensure clients continue to have the widest possible choice, Fidelity has removed the requirement that ISA account holders only contribute to a single stocks and shares ISA within a tax year.”

The reason for shifting your investments to another stocks and shares ISA might be down to the funds on offer, but it will be more down to customer experience, says Brian Byrnes, head of personal finance at Moneybox. 

He said the move should encourage ISA holders to shop around and look at the providers' different features and low platform costs. 

Is now a good time to open an ISA? 

As we’ve only just stepped foot into the new tax year, you might be wondering if now is a good time to open an ISA or wait until later in the year. 

If you’re looking to open a stocks and shares ISA, data by HL shows early bird investors are better off. 

The research by the investment firm shows if you invested your full ISA allowance in the Legal & General International Index fund on the first day of each tax year for the past 10 years, you would have received a return of £360,500 – £38,000 more than if you invested on the last day of the tax year. 

Myron Jobson, senior personal finance analyst at interactive investor, reiterates this: “Countless research shows that the early bird gets the worm. Investing early allows your investments more time in the market to potentially grow over the course of the year, benefiting from compounding returns.”

It’s also a good time to open a cash ISA right now, especially if you're fixing for a year or two. This is down to savers still raking in high returns from the 5.25% base rate – but experts predict that interest rates will fall this spring, pushing rates on savings down too. 

So, there’s no better time to take advantage of a cash ISA. If you’re looking for flexibility, the top cash ISA is offering 5.17% by Plum, followed by 5.16% by Moneybox. But, don’t forget to read the small print. These only allow up to three withdrawals per year. 

If you’re prepared to fix your cash, you can earn just below 5%. Currently, Shawbrook Bank is returning 4.76% on its one-year fixed ISA, with a minimum deposit of £5,000. OakNorth Bank is offering 4.7%, and you can open the ISA with just £1. 

Right now it might seem like the rate on an easy-access cash ISA is offering a more attractive rate, but if the base rate does fall, the return on a fixed ISA won’t change within the term you’ve fixed for. So, in the longer term, you could be setting yourself up for a better return.