Stocks & Shares ISA

[fellatthefirst]

I'm looking for some clarification here. I understand that i can pay up to £20k a year into a stocks and shares ISA tax free. Am i right in thinking that any profit made on that is also tax free?

Could i potentially leave the profit in the isa, put another 20k in the next year and then let it grow again and keep doing that year after year and any profit that has been made from the interest will all be tax free?

Example:

yr 1 £20k goes in 10% made so £22k
yr 2 £22k + £20k goes in 10% made so £46.2k
yr 3 £46.2k + £20k goes in 10% made so £72,820

I could potentially then take the £12,820 profit from the last 3 years tax free?

Obviously i understand there are fee's etc etc and % can be + or - but my example is just for illustration.

Thanks in advance

[PurpleMoonlight]

The whole purpose of an ISA is that it is tax free growth.

[Jon39]

fellatthefirst said:

Could i potentially leave the profit in the isa, put another 20k in the next year and then let it grow again and keep doing that year after year and any profit that has been made from the interest will all be tax free?

You are correct.

Indeed, I forget when these savings incentives began (they were originally called Personal Equity Plans), but there are quite a few equity ISA millionaires now.
Time and compounding are your friends. You need to choose good businesses to invest in though.

They are referred to as tax- free plans, which they were to begin with, but then the ability to reclaim the dividend tax deductions was withdrawn, so they were then no longer completely tax- free. That has improved recently, now that more tax is being charged on dividend payments.

I have just noticed, that you used the word interest. Presume you did not mean that.

Edited by Jon39 on Saturday 18th November 15:20

[Broccers]

Its in an isa - there is no tax to pay on gains. The only advantage of having one.

[Jon39]

Broccers said:

Its in an isa - there is no tax to pay on gains. The only advantage of having one.

In addition, you now do not have to pay any of the further tax, on all dividends received.

[fellatthefirst]

Many thanks for all your comments! I’m going to open one on Monday with HL. Cheers

[xeny]

Note that if you're planning to buy funds, HL is an expensive choice of broker. Monevator's cost table is a useful resource:

http://monevator.com/compare-uk-cheapest-online-br...

[Craikeybaby]

xeny said:

Note that if you're planning to buy funds, HL is an expensive choice of broker. Monevator's cost table is a useful resource:

http://monevator.com/compare-uk-cheapest-online-br...

Pretty much what I would have written.

[p1doc]

ginger/username was doing the website fiveraday for investments and seemed popular with pistonheads

[fellatthefirst]

I opened one today. Decided to use my IFA in the end over the HL one as he has offered to manage it for 1% and his companies portfolio has shown a good return over the last 5 years. Now for the saving!