🔔 Why can't I top up my Virgin Fixed Rate ISA to use my full allowance?

Savers Question

I opened a Virgin Fixed Rate ISA earlier in the tax year and deposited £10,000.  I now have additional funds available and wanted to use up my ISA allowance – but I’ve been told I can’t as the fixed rate ISA is closed to new deposits and, apparently, I can’t even open an easy access ISA with them too. Why not?

Anna's Answer 

Unfortunately, you have fallen victim to one of the complicated rules of ISAs and it’s a confusing one.

The rule sounds simple enough – you are only allowed to subscribe to one cash ISA, one stocks and shares ISA and one Lifetime ISA each tax year – and this can be a combination of all three, as long as the total amount is within the annual ISA allowance, which is currently £20,000.

So, for example, you could put the maximum £4,000 into a Lifetime ISA and split the remaining £16,000 between a cash ISA and a stocks and shares ISA. Or put the whole £20,000 into either a cash ISA or a stocks and shares ISA.

And if you open an easy access ISA, it will normally allow you to add to it at any stage, even if it has been withdrawn from sale to new customers (there may be exceptions, so it’s important to check).

But fixed rate cash ISAs are different – they are usually only available for new deposits for a limited amount of time. So, unless your provider offers a Portfolio ISA option - click here to read about what this is - opening another cash ISA, even with the same provider, is against the rules as it would mean you are subscribing into two cash ISAs in the same tax year.

The same problem occurs for those who are paying into a Help to Buy ISA. Although there are similarities to the Lifetime ISA, the Help to Buy ISA is a cash ISA, so if you subscribe the maximum £200 per month – there is still an additional £17,600 of your ISA allowance that you may wish to use up. But you are not allowed to open another cash ISA in the same tax year, unless the ISA provider offers the Portfolio ISA feature. Instead you could open a stocks and shares ISA in order to use up your allowance.

All you can do in this situation is to transfer the fixed rate cash ISA to another provider and top up the new account – but there will be a hefty penalty to transfer the fixed rate ISA within the term and unless you act quickly, it may not be sorted out by the end of the tax year.

Over the years, ISAs have become increasingly complex and trying not to fall foul of the rules can be like navigating a minefield.

If you have any other issues that you have come across when opening cash ISAs, please let us know.