Tax Guide - ISAs

Investments Quote Line

0845 108 0505

• Home
• Mortgages
• Online shares
• Banking
• Savings
• Pensions
• Car Finance

Tax Guide to ISAs

Investing in Individual Savings Accounts (ISA) 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 or
• Capital gains tax on overall growth

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

ISA limits

ISA limits currently stand at:

• £5,100 for a cash ISA
• £10,200 for a Stocks and Shares ISA

Tax credit

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.

Guides to ISAs

• Mini ISA
• Maxi ISA
• Tessa-Only ISA
• Ethical ISA
• Share ISA
• National Savings ISA
• PEP Transfers