Saving tax

The government wants to encourage us to save and invest our hard-earned cash, hence ISAs.

• If you put cash in an ISA then any interest you earn on deposits is tax-free. In other words you would receive 20% more interest if you were a basic rate taxpayer and 40% more interest if you were a higher rate taxpayer.
• If you receive any dividends from UK shares in an ISA and you are a higher rate taxpayer you will not have to pay an additional tax.
• You can avoid paying capital gains tax if the value of the share holdings that are protected by an ISA increase.
  
  All capital gains are free but if you make any losses within your ISA, these cannot be offset against gains made outside it.