Many different financial products offer joint accounts for partners and spouses. You may have a joint savings account, investment account or mortgage. However, can you have a joint ISA with your partner? In this article, we’re going to break down whether or not you can have a joint ISA and the best way to manage ISAs with someone else.
Quick Overview
You are unable to open a join ISA with a partner. ISAs must be opened in an individual’s name. However, you can use both of your ISA allowances to save and invest more money Tax-free.
Can You Have A Joint ISA?
No, you are unable to have a joint ISA. This applies to Cash ISAs, Stocks and Shares ISAs and Lifetime ISAs. You can only open an ISA in your own name unless you are opening a Junior ISA for a child.
While you are unable to have a joint ISA, you can both open separate ISA accounts which is a better option anyway. This allows you and your partner to double your Tax-Free ISA allowance.
What Is An ISA?
An ISA (or Individual Savings Account) is simply a type of savings and investment account you can have in the UK. Think of it like a protective bubble. Anything inside this bubble (like your savings or investments) doesn’t get taxed. So, if you’ve ever had that sinking feeling of seeing taxes diminish your hard-earned returns, an ISA is your tax-free sanctuary.
But why should you consider having one? Here are the perks:
- Tax-Free Growth: The main benefit, and probably the biggest attraction, is that any money you make from investments or interest is completely tax-free.
- Flexibility: There’s a range of ISA types, including cash ISAs where your money is kept just like in a regular savings account, suiting different needs and risk appetites.
- A Safety Net: Since they’re designed to protect your money, ISAs can act as a financial cushion, ensuring that your savings remain untouched by taxes.
In a nutshell, ISAs are an invaluable tool in your financial toolkit, offering a tax-efficient way to save or invest. However, always consider your own financial circumstances and maybe chat with a financial advisor to see if an ISA aligns with your goals.
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ISA Rules Explained
In the UK, an ISA allows you to save or Invest up to £20,000 per year without paying any tax on capital gains, dividends, or interest. This is powerful over long periods of time as your portfolio grows and starts to generate large amounts of returns in the stock market.
While you and your partner are unable to save into the same account, you can save individually. This actually benefits you as a couple, as you can save £40,000 tax-free rather than the £20,000 individual balance.
As long as you both trust each other, this can be a great way to save and invest as a couple for your future.
You are unable to transfer your ISA allowance to another person so your partner will have to open an account of their own if you want to save over £20k in a single year.
How To Manage ISAs As A Couple
There are a couple of ways to manage ISAs as a couple but it ultimately depends on your goals. Let’s take a look at the two main scenarios you will find yourself in.
Open Two ISAs To Double Your Allowance
As a couple, you can open two ISA accounts allowing you to save up to £40,000 tax-free.
You can manage your finances individually and save in your own ISAs and then pool the money when you plan to use it for a purchase.
Alternatively, if one of you is maxing out your ISA allowance it would then be beneficial to start filling your partner’s ISA to benefit from the tax-free gains. If you both trust each other fully and are planning a future together this is the most tax-efficient option.
Officially, you can’t “share an ISA” but if you are already pooling money in other accounts such as savings accounts and mortgages, you will already be managing your financial future together.
You may also want to have different goals assigned to different ISAs. One person’s ISA may be dedicated towards long-term investing for the future in higher-risk equities whereas the other may be a Cash ISA generating a reliable return on your cash. This way you can separate your money as a couple, depending on the goals you are saving for.
Save For A House In Two Lifetime ISAs
If you and your partner are planning to buy a house in the future, each of you can open a Lifetime ISA and claim the 25% government bonus. You can pay a maximum of £4,000 per year into a Lifetime ISA and receive a £1,000 bonus from the government.
Both you and your partner can open a Lifetime ISA and save up to £8,000 while getting a £2,000 bonus. This is a considerable amount of money over the course of two years. £4,000 of a £20,000 bonus can come from the government.
When you’re ready to purchase your new house, you can put both of your Lifetime ISA balances towards the house.
You can also have another ISA open at the same time as your Lifetime ISA but will only be able to save a maximum of £20,000 between them.
Can You Pay Into Someone Else’s ISA?
The rules around this are a little unclear. Here’s the official wording from the government:
“Investors can subscribe cash to either type of ISA. They must subscribe with their own cash, and this includes payment by cheque, direct debit, charge card, credit card, telegraphic transfer and standing order. Cash subscriptions from third parties can be accepted without question unless the ISA manager holds information that shows that the cash does not belong to the investor.“
The wording here is quite confusing as it seems contradictory. How can the money belong to the investor if it’s coming from a third party? However, we take this to mean that the money sent to you, is intentionally being sent to you. For example, if your partner owed you £500, they could send this directly to your ISA, at which point that money would become yours.
To stay on the safe side, the easiest way to pay into someone else’s ISA is to send them the money first as a gift, then they can top up their ISA from their own bank account. That way the money is coming from their own account.
Can Two People Buy A House With Separate Lifetime ISAs?
Yes, if you and your partner are both purchasing your first house to live in, you can use both of your Lifetime ISAs. This means you can both save and claim the 25% government bonus when saving for a house.
By both saving in separate Lifetime ISAs, you will be able to save £8,000 + £2,000 bonus per year rather than one person saving only £4,000 + £1,000 bonus per year.
Can You Inherit An ISA?
Yes, if your spouse or civil partner passes away you can inherit their ISA allowance. You will still get your normal ISA allowance and will get another tax-free amount (Inherited Allowance) up to:
- the value they held in their ISA when they died
- the value of their ISA when it’s closed
Once they die the money will have to be transferred into an account in your name. Any gains on the existing ISA balance will be protected from tax as long as the inherited money is kept within an ISA.
Final Thoughts
While you can’t have a joint ISA, it doesn’t really matter. You and your partner can open individual ISA accounts and each have a full ISA allowance. As you can inherit your partner’s ISA without losing tax benefits, there is no real downside to it not being a joint account.
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