Question About ISA's

kieran12321

Hi. I'm 18 and don't really understand something about ISA's, that I hope someone can clear up.

Most ISA's I see advertised by banks are advertised as "Tax-free ISA's". What I don't understand is, why 'tax free'? None of my other accounts (current accounts) are 'taxed' that I know of. Obviously my salary gets taxed, but that's taxed BEFORE it gets into my current account, so why do they say 'tax-free', I thought every bank account was tax free?

Why would you even put money in an account that wasn't tax free?

Can someone please help me clear this up, Ican't wrap my head around it.

Sorry if this is really basic, I just don't understand.

Mortgage_&_debt_free

Your current a/c is taxed if you earn interest on your money.

Unless you are in an ISA any interest on savings/investments (i.e. dividends) you hold are taxed i.e. the interest only gets to you after it has been taxed.

If you earned £100 interest and the money wasn't in an ISA you would only get £80 (I'm assuming you're a basic rate taxpayer).
HTH

kieran12321

Ah, that makes sense now. Thanks for that.