05: Tax treatment of ISAs

There is no minimum holding period for any ISA. In December 2006, the Chancellor announced that ISAs would become ‘a permanent part of the savings landscape’.

Stocks and shares component

In the stocks and shares component, all capital gains and dividends are free of UK tax. However, foreign withholding taxes may apply.

The 10% tax credit on UK dividends ceased to be reclaimable by ISA managers after 5 April 2004. Interest received on bond investments is tax-free.
 
If cash is held pending future investment, any interest it earns is subject to a flat 20% tax charge. All interest earned in the cash component is free of income tax.

Cash ISAs

The interest in a cash ISA is tax-free.