Accumulate Wealth and Retire Earlier Using a Tax Free ISA

Invest £10,200 in your tax free ISA
and start building an income
producing share portfolio

Now more than ever, you should consider structuring your current and future investments in a stock and shares Individual Savings Account.

What is an Individual Savings Account?

An ISA is simply an account that shelters the contents from income tax and capital gains tax to protect your investments from capital gains tax.

There are two types of ISAs:

With regards to share investments held outside a stock and shares ISA, the Emergency Budget confirmed that:

  • No capital gains tax is to be paid when gains are less than £10,100 per annum
  • Capital gains tax is payable at the increased rate of 28% but only with regards to gains above £10,100
  • No taper relief or indexation is re-introduced

Stick all your shares in a tax free ISA

From 6 April, 2010, anybody over 18 can contribute £10,200 in an Individual Savings Accounts.

From 1 November 2011, children born before September 1, 2002, or after January 2, 2011 will be eligible to open a Junior ISA.

For many people holding shares in a tax free ISA is one of the best methods of holding income generating shares.

For some there are income tax benefits

This is especially true for higher rate taxpayers who suffer 25% on most dividends on shares held outside an ISA. Inside an ISA the dividends are tax free.

If you are in the new 50% additional tax bracket, then the benefits are even greater.

However, basic rate taxpayers don’t gain any income tax advantages in ISAs because their dividends are tax free anyway. However, it's always possible that in future you may move to a higher income tax rate bracket.

Then there are the capital gains tax benefits

If and when you decide to sell (some of) your shares, then you might possibly face a capital gains tax bill, if

  • you hold the shares direct, and
  • sufficiently large gains are present

However, that can’t happen in a stock and shares ISA.

Return from Tax Free ISA to Home

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