I opened a Help to Buy individual savings account (Isa) in December. As it is a regular saver account, I will continue to pay into it during the next tax year. Does that mean I cannot open another new cash Isa?
I question this as Isa rules state that you can only pay into one cash Isa in any tax year, but your allowance resets each tax year. So, as my Help to Buy Isa was opened in a previous tax year, would I be allowed to continue paying into it and still open a cash Isa as long as the total doesn’t go over the yearly threshold?
The key action to consider is whether you have actually paid into the Help to Buy (H2B) Isa in the current tax year. In your case, even though you opened the H2B Isa in the last tax year, you have continued to pay into it in the current tax year, which means that you cannot open another cash Isa this tax year. What is important is whether any new funds are added in each tax year, not when it was opened.
This may be an issue for those who want to fully utilise their cash Isa allowance each tax year (£15,240 for 2016/17). The maximum that can be saved into the H2B ISA is £200 a month, plus a one-off payment of £1,000 in the first month.
One way around this is to use a provider who offers a ‘portfolio Isa’ facility. This means that you can open a H2B Isa and another cash Isa with the same provider without flouting the rules. But very few providers offer this. Nationwide, NatWest and Aldermore Bank have the best paying Help to Buy Isas with the portfolio Isa facility. These all pay 2% AER.
Of course, you could also use a stocks and shares Isa to use up the remainder of the Isa allowance if you are comfortable taking higher risks with your money.