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Stocks and shares ISAs are open to anyone from age 18 who is a UK resident. Cash ISAs are available from the age of 16.


Because of the significant tax advantages, contributions into an ISA are restricted, in 2017/18 this allowance is £20,000.

Unlike pensions you are not restricted on how much you can save into an ISA over your lifetime, only each financial year; however if you do not use your allowance, you cannot carry it forward to future years.


All income and capital from an ISA is tax-free: whatever money you take out of an ISA is without tax, no matter how large it grows. In addition, no tax is payable on dividends from shares within an ISA.

The money within your ISA is not subject to tax, and any gains are made tax-free i.e. no capital gains tax is applied on any growth and no income tax is applied to any interest or dividends.

This is a significant benefit of an ISA: the fund can successfully grow in a tax-free environment meaning your capital would grow quicker in an ISA, all othering things being equal.

Taxation on your contributions

Contributions made into an ISA do not attract any tax relief, so what you put in is what is invested (less any fees).

Taxation on death

This is a drawback of an ISA: the full value of an ISA is within your estate when you die and therefore is potentially subject to inheritance tax, which is 40%.

On death, although the widow, widower or bereaved civil partner cannot directly inherit the ISA, they can open an inheritance ISA since December 3, 2014. It’s essentially an extra ISA allowance on top of the annual amount.

The allowance will be the same value as your partner’s ISA value at the date of their death and you put the investment into an ISA in your name, keeping all gains, income and withdrawals tax-free. You have three years after their death to do this, or 180 days after the administration of the estate is complete, if later.


With investment, your capital is at risk. The value of your portfolio with Lexo can go down as well as up and you may get back less than you invest. It is important that you understand the risks. Lexo aims to provide information to help you make your own informed decision. It does not provide personal advice based on your circumstances. If you are unsure, please seek personal advice from Lexington Wealth.

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