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This is slightly different to my earlier ISA question, and relates to the current market conditions where best-buy ISAs often have 1 year bonuses, and may not accept transfers in.

Consider the following situation:

  • June of tax year one - open a cash ISA with a 1 year bonus, pay into it
  • April of tax year two - open a new cash ISA with a great rate that doesn't accept transfers, start paying into that
  • June of tax year two - bonus on last year's ISA ends, rate drops dramatically

In that situation, it isn't possible to transfer the previous year's ISA into the one you're paying into that year. However, it may be possible to find an ISA on the market then which does accept transfers in, and pays an OK rate.

Are you allowed to open a second ISA in a tax year, as long as you only transfer in money from previous years, and don't make any new contributions? Or would the restrictions on only opening one ISA per tax year prevent you moving past contributions to a new account that's a different account to the one you're making new contributions to?

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6

Yes, transferring in to an ISA does not count as subscribing to it, and it is subscriptions that are limited to one per year.

See eg here - I won't paste an excerpt as it really needs the context of all the answers on the page, but in summary it supports my "Yes you can" above.

By the way, if you want a definitive answer from HMRC you can ring their ISA helpline:

ISA Helpline

For general enquiries about tax rules on ISAs and more information on Junior ISAs

Individual Savings Account Helpline is part of the Savings Helpline

Opening hours 8.00 am to 8.00 pm, Monday to Friday 8.00 am to 4.00 pm Saturday

0845 604 1701

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