An ISA – or Individual Savings Account – is a very tax efficient way to save as
you pay no income or capital gains tax on the returns you receive. No matter
how much your investment grows and no matter how much you take out over
the years, your returns are tax free. It therefore remains one of the taxman’s
most valuable concessions to investors.
That’s why most experts agree that everyone’s first investment in each tax year
should be within an ISA and, if possible, that you should make full use of the
available allowance. Remember, once the new tax year begins on 6 April, any
unused allowance is lost forever.
ISA BENEFITS AT A GLANCE
• Shelter an investment of up to £10,200 from tax (£20,400 for a couple)
• ISA limits increase annually in line with inflation (RPI)
• You pay no capital gains tax on the returns from your ISA
• No further income tax to pay
• You don’t have to mention ISAs on your tax return
• You don’t need to hold an ISA for a fixed term
(although a Stocks and Shares ISA should be regarded as a long-term investment)
• You have complete freedom about how you use the money in your ISA. You can
take an income or make a withdrawal whenever you wish.
