ISAs

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8. Tax rules on ISAs

ISAs are all about tax advantages. If there were no tax advantages, there would be no ISAs.

So what exactly is the tax position with ISAs?

1. Income from investments held in an ISA qualifies for tax credit

   So, interest payments on bonds, and dividends from shares, are free of income tax. From 6th April 2004, dividend income from shares held in ISAs became taxable, but until then it was tax free. Interest on qualifying bond investments and cash continued to be tax-free after 6 April 2004.

2. Capital Gains on investments in an ISA are tax free

   So if you make a profit on investments held in an ISA, you don't pay capital gains tax when you dispose of them, and the gains do not count towards your annual CGT allowance.

3. ISAs don't offer protection from inheritance tax

   Sorry, but you can't win them all.

1. What is an ISA? 2. Who can take out an ISA? 3. ISA investments: the 'Components' 4. The different kinds of ISA: Maxi, Mini and Tessa-only 5. How many ISAs can you have? 6. How much can you put in an ISA? 7. Maxi or Mini? 8. Tax rules on ISAs 9. Practical significance of ISA tax rules 10. Cash ISAs 11. Stocks & Shares ISAs 12. Choosing an ISA fund 13. Buying an ISA 14. Charges and CAT standards 15. Where to find an IFA 16. Switching ISA investments 17. Transferring shares into an ISA 18. Withdrawing funds from an ISA 19. Conclusion

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