Cash Isa providers fail to offer savers benefits of more flexible rules | Isas

Savers hoping to make the most of their Isa allowance as the end of the tax year approaches may be surprised to find that some providers haven’t adopted rule changes designed to make the tax-efficient accounts more flexible.

With the future of cash Isas reportedly under discussion at the Treasury, this year’s last-minute rush to invest before 5 April is under way, and providers are offering attractive interest rates to catch the eyes of savers.

The current tax year is the first in which you can open more than one of the same kind of Isa – a change that was announced in 2023’s autumn statement. Previously, your £20,000-a-year Isa allowance could be spread between different types, including a cash Isa or stocks and shares Isa, but since April 2024, the tax authorities have let you have any combination.

In theory this means that someone, for example, who has already during this tax year opened a fixed-rate cash Isa that they are no longer able to pay money into can now open another one with the same bank or building society and make the most of the best available rates that it is offering.

It is one of several moves designed to simplify the system, but in practice many providers will not accept an application for a second cash Isa.

Research from the financial data company Moneyfacts suggests that almost two-thirds of cash Isa providers do not allow customers to open a second account with them in the same tax year. This is the case at most of the UK’s biggest banks, including Santander, Barclays, Lloyds, NatWest and HSBC, and at several building societies offering some of the best rates on the market.

A saver attracted by the 4.22% two-year fixed cash Isa rate on offer this week at Coventry building society, for example, will find in the terms and conditions this rule: “You must not have paid in current tax year subscriptions to another cash Isa with us in the same tax year.”

Anna Bowes, a savings expert at the financial advisory firm The Private Office, says that while the rules on what you can do have changed, providers have not been obliged to adopt them.

When she looked at what was available, “what I found was that most providers would let you open an Isa with them if you had one with someone else, but most would not let you open a new one with them”.

She says that some providers were already offering what was called a flexible Isa, which allowed a similar thing ahead of the change.

Nationwide building society is one of the best-known providers to offer this kind of cash Isa to savers. It describes it as a “portfolio cash Isa”, in which you can hold different types of accounts opened at different times. A spokesperson says: “This means [a saver] could put some in, say, a fixed-rate Isa and leave some in an easy access Isa, or have two fixed-rate Isas with different terms, etc.”

At the time of writing, Nationwide was offering a one-year, fixed-rate Isa at 4.1%, and a two-year one paying 4%, plus a one-year triple access online Isa that you can make up to three withdrawals a year from before the interest rate is cut from 4% to 1.75%. You can take advantage of these rates even if you already hold money with the society, and spread your savings money across all three types of account.

The Moneyfacts research found that only 36 out of the 98 cash Isa providers it lists said they allowed multiple accounts in the same tax year. These include the online bank Zopa, which was offering a table-topping 5% on a one-year cash Isa at the start of the tax year, and this week appeared in the best-buy tables paying 4.4%. OakNorth Bank was offering a best-buy rate of 4.41% and will let you pay in even if you already have one of its cash Isas. Kent Reliance, M&S Bank and Skipton building society are among other providers that allow it.

Several banks, including Santander, indicated that they could review their position in the future.

However, , if there is a question mark over the accounts in the future, there might not be an incentive for providers to make changes.

Another rule change designed to make paying into an Isa easier was the scrapping of the requirement to sign a declaration before moving money into a previous year’s account; but again, many providers have ignored this change.

Yorkshire building society’s website, for example, states that if you have a cash Isa from a previous tax year that you want to add to, “you’ll need to complete an Isa declaration form. We can’t add money to your account until we’ve received this.”

The good news is that the process is pretty straightforward and, whoever your account is with, it should just involve filling in a form online or in a branch.

Partial transfers on money saved or invested this year were also introduced, with the government website now stating: “You can transfer all or part of the savings in your individual savings account (Isa) from one provider to another at any time … The investment can have been made this year or in previous years.”

However, banks and building societies are typically refusing to take partial transfers of money invested in this tax year, and insisting that if you do want to switch, you have to move the whole lot.

A spokesperson for the Treasury says: “It is a commercial decision for individual Isa providers whether they take advantage of increased flexibility in the Isa system, and customers should compare the terms offered by providers to find a product that suits their needs.”