A GUIDE TO SAVING AND INVESTING IN ISAs

WHAT ARE THE BENEFITS OF INVESTING IN ISAs?

There are *Income Tax* and *Capital Gains Tax* benefits.
You do not have to declare your *ISA* on your tax return.
The ISA *manager* will either receive *income* gross of tax or reclaim the savings tax from HM Revenue and Customs on your behalf. You don’t have to do a thing.

Income Tax

Money held in the *cash* component of an ISA is entitled to receive income without being charged savings tax.
Higher rate taxpayers are exempt from paying the extra 25% tax on *dividends* from *equity* investments which they would normally pay on investments outside an ISA wrapper.
*Corporate bonds*, which pay out fixed *interest distributions*, held in an ISA are entitled to receive income gross of tax or reclaim the savings tax of 20% (as appropriate).
Interest paid on cash held temporarily in a *stocks and shares* ISA will be taxed at a rate of 20%, but higher rate taxpayers will suffer no further tax liability.

Capital Gains Tax

All gains from any investments sold within an ISA are free of Capital Gains Tax (CGT), but it is important to note that any losses cannot be offset against gains made elsewhere.

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