Individual Savings Accounts (ISAs)
Tax Benefits
Using ISAs you may invest up to £7,200 on a tax-efficient basis each tax year. There is no tax relief on money put into ISAs on entry. However, you are not liable to pay income or capital gains tax on the proceeds of an ISA and the investments you hold within an ISA grow largely free of income and capital gains tax.
ISA dividend income is paid net of the 10% tax credit on dividend income. This cannot be reclaimed, reducing the attraction of equity investments within ISAs to basic rate taxpayers. There remains an income tax incentive for higher rate taxpayers, who have no further income tax liability on dividends received on ISA investments. Interest from deposits and from corporate bonds attracts a 20% tax credit.
Stocks and shares investments held within ISAs are not liable for capital gains tax.
Introduction
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