re ISAs: mysterious phrase on this website

mrodent

Hi all,

Can someone possibly explain this phrase I found here on Martin's page about ISAs at http://www.moneysavingexpert.com/savings/isa-discounts ?

"Yet sadly the tax benefits of investing inside an ISA have been eroded somewhat. Now there's no tax release on dividends paid on shares, the main advantage of putting money in a shares ISA is you don't pay capital gains tax on profits you make."

Does he mean "tax relief"? and is this true? I have a micro-company and the dividends continue to come with tax relief?

Above all, can someone tell me WHEN this came in, and WHERE I can read about it?

Thanks very much

DavidHayton

I would call it "tax relief."

What they're getting at is that if you invest in a company or fund, the dividends are taxed at source so there is no further (basic rate) income tax to pay, but this tax cannot be reclaimed if you are a non-taxpayer.

If you decide to invest via an ISA, the ISA manager cannot reclaim the tax either. There is therefore no income-tax benefit for a non-taxpayer or basic rate taxpayer when they invest in an ISA.

I would refer to this as "no tax-relief", though there is sense in the term "no tax-release".

There may be different rules for "micro-companies" like there are for Venture Capital Trusts, but I don't know anything about these.

David

AirlieBird

It came in from the 2004-05 tax year.
http://www.direct.gov.uk/en/MoneyTaxAndBenefits/ManagingMoney/SavingsAndInvestments/DG_4016062

Dividend income:

• if you're a basic rate taxpayer inside or outside an ISA you pay tax at 10 per cent on dividend income; this is taken as a 'tax credit' before you receive the dividend and cannot be refunded for ISA investments
• if you're a higher rate taxpayer you would normally pay tax on dividend income at 32.5 per cent; in an ISA you won't get back the 10 per cent dividend tax credit element of this, but you will save by not having to pay any additional tax

p00hsticks

It's actually a 'tax credit' - you used to be able to claim it back if you weren't liable for tax, but Gordon Brown changes the rules to stop this, hitting pension funds hard.

http://www.thisismoney.co.uk/30-second-guides/article.html?in_article_id=419053&in_page_id=53611

le_loup

p00hsticks wrote: »

but Gordon Brown changes the rules to stop this, hitting pension funds hard.

... and before him, the first 10% was stopped by Nigel Lawson.
... and at the same time CGT was stopped and Corporation Tax lowered.

mrodent

thanks to all!