Tax Guide - ISAs

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Tax Guide - ISAs

Investing in Individual Savings Accounts means your money is exempt from tax. The rules are the same as for PEPs - you will not be liable for:

• Income tax on interest or dividends
• Capital gains tax on overall growth

Limits are imposed however on the amounts that can be invested each tax year.

The Government has said that these limits will apply until April 2010.

Until April 2004 a tax credit of 10% was paid on dividends of shares held within an ISA. So if you received a dividend of £90 on your shares, you would get £100 if they were held within an ISA.

This tax credit has now ceased, so there is no difference to dividends on shares held inside or outside an ISA for standard-rate taxpayers.

For higher-rate taxpayers, there will still be an advantage to holding shares in an ISA. They have to pay 32.5% tax on dividend income on shares held outside an ISA, but only 10% for shares held within an ISA.

Below are links relating to ISAs:

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