Editing Individual savings account (section)

==Tax treatment==
Interest on cash held in an ISA, including stocks and shares ISAs,<ref>{{cite web|title=Five important new ISA rules explained|first=Henry|last=Irving |date=7 January 2016|publisher=Hargreaves Lansdown|url=http://www.hl.co.uk/news/articles/five-important-new-isa-rules-explained|archive-url=https://web.archive.org/web/20160602021300/http://www.hl.co.uk:80/news/articles/five-important-new-isa-rules-explained|archive-date=2 June 2016|website=HL.co.uk}}</ref> is not subject to [[Taxation in the United Kingdom#Personal taxes|income tax]].<ref>{{cite web|title=How ISAs work|url=https://www.gov.uk/individual-savings-accounts/how-isas-work|website=gov.uk|access-date=17 January 2017}}</ref>

Dividends are not subject to additional tax, interest on bonds is not taxed, and [[Capital gains tax|capital gains]] are not taxed (nor may capital losses be used to offset other gains).

There is no need to report interest or other income, capital gains, or trades to [[HMRC]] as it is not taxable income. This is a considerable paperwork reduction for active traders or those who may otherwise be required to report their trades because they have total sales value exceeding four times the annual CGT allowance, which outside a tax wrapper would require that all trades be reported even if there is no capital gains tax to pay.

Since the income is not taxable it did not count for age-related personal income tax allowance reduction when that extra allowance existed.

=== Death of investor ===
Cash or investments held in ISAs are ordinarily subject to [[Inheritance tax in the United Kingdom|Inheritance Tax]] when the account holder dies, if their estate is valued above the IHT [[Inheritance tax in the United Kingdom#Nil-rate band|nil-rate band]].<ref>{{Cite web |title=Individual Savings Accounts (ISAs): If you die |url=https://www.gov.uk/individual-savings-accounts/if-you-die |access-date=2023-11-26 |website=GOV.UK |language=en}}</ref> Since August 2013 it became possible to hold [[Alternative Investment Market|AIM]]-listed shares in a stocks and shares ISA, some of which qualify for business relief;<ref>{{Cite web|url=https://www.gov.uk/business-relief-inheritance-tax|title=Business Relief for Inheritance Tax|website=GOV.UK|language=en|access-date=2020-02-13}}</ref> in this way a stocks and shares ISA portfolio consisting of these securities can be gifted without being subject to Inheritance Tax, provided the qualifying securities have been held for at least two years upon death.<ref>{{cite web|title=AIM IHT ISAs – tax savings|url=https://www.wealthclub.co.uk/aim-iht-isas/tax-savings/|website=wealthclub.co.uk|access-date=17 January 2017}}</ref>

For deaths of ISA investors on or after 3 December 2014, the surviving spouse or civil partner can apply for an increased ISA allowance in the form of an Additional Permitted Subscription.<ref>{{Cite web|url=https://www.hl.co.uk/investment-services/isa/additional-permitted-subscription-aps|title=Additional Permitted Subscription (APS)|website=Hargreaves Lansdown|language=en|access-date=2020-02-13}}</ref> This allowance is separate from the normal annual allowance, and is based on the value of the deceased's ISA; it is available whether or not the surviving spouse or civil partner inherited the ISA assets.<ref>{{Cite web|url=https://www.gov.uk/guidance/manage-additional-permitted-subscriptions-into-an-isa|title=Guidance for ISA managers: additional permitted subscriptions into an ISA|date=19 July 2018|website=GOV.UK|language=en|access-date=2020-02-13}}</ref>