Stock ISAs - Tax free confusion

Johnny_WL

Thank you All for your time writing such considered and knowledgeable contributions.

Bowlhead99 in particular thank you (for your entry 25 Aug 9:32 AM) for the comprehensive explanation and total clarity provided RE: ISAs and tax.
To put savers minds at rest perhaps MSE website will consider a simplified re-write.

For the remaining discussion - interesting and educational - some other useful nuggets.
Thanks.

Johnny_WL

george4064

bowlhead99 wrote: »

Correct on the first two. You seem to have included inheritance tax by mistake. Any assets in an ISA form part of a person's estate and if the owner of the ISA dies, beneficiaries will pay the same inheritance taxes on the contents as if it was just a regular pile of stocks and shares or cash.

But in some sense you're right: you will not receive an inheritance tax bill just for the action of funding an ISA with cash and using it to buy shares or investment funds. Inheritance tax is simply something that might be levied as a result of you dying. Similarly you won't receive a bill for other taxes either, like council tax, landfill tax, national insurance, vehicle excise duty, just for the action of funding an ISA with cash and using it to buy shares or investment funds. Because those things are levied for other reasons.

Ahh thats interesting, I always thought that an ISA is exempt from inheritance tax so upon the owner's death it can be passed down to a child without any inheritance tax liabiity.

bigadaj

george4064 wrote: »

Ahh thats interesting, I always thought that an ISA is exempt from inheritance tax so upon the owner's death it can be passed down to a child without any inheritance tax liabiity.

You are partly right but it's a recent change.

An isa is inheritable to a spouse now, but not to a child, so inheritance tax is avoided or more correctly the tax free status of the isa is retained. No inheritance would have been paid but retaining it within the isa means that income from the isa isn't taxed, which it would have been before teh change.