Originally published at: https://blog.investengine.com/are-isa-gains-tax-free/
Individual Savings Accounts (ISAs) are a popular way to invest in the UK, and one of their biggest advantages is how they’re treated for tax. But are ISAs tax free? And what does “tax-free” really mean? And how does it work if you’re investing in things like ETFs?
In this guide, we explain how ISAs work. We’ll explore which gains are tax-free and how you can make the most of your allowance, especially if you’re investing for long-term growth.
What is an ISA?
An ISA (Individual Savings Account) is a government-backed account that lets UK residents save or invest tax-free, up to an annual limit.
For the 2024/25 tax year, you can put up to £20,000 into ISAs. You can spread this across different types of ISAs — or put the full amount into one account.
The most common types of ISAs are:
- Cash ISA – Works like a regular savings account, but with tax-free interest
- Stocks and Shares ISA – Lets you invest in funds, shares, or ETFs with tax-free growth and income
- Lifetime ISA – Aimed at first-time buyers or retirement saving (up to £4,000 a year, with a 25% government bonus)
At InvestEngine, we focus on Stocks and Shares ISAs, where you invest in ETFs to grow your money over time.
Are ISA gains really tax-free?
Yes — when you invest through a Stocks and Shares ISA, any gains you make are completely free from UK tax.
That means:
- No Capital Gains Tax (CGT) on profits from selling investments
- No Income Tax on dividends or interest received
- No need to report ISA gains to HMRC
Whether your investments grow by 5% or 50%, those returns stay yours. It’s what sets the ISA apart as an investment vehicle in the UK.
ISAs are a powerful way to grow your wealth over time, especially when compared with a General Investment Account (GIA), where gains above £3,000 (as of April 2024) may be taxable.
GIAs can be effective tools for those that have maxed out their ISA allowances and want to continue investing, but most opt for an ISA for the tax benefits if both are on the table.
Watch our video below to learn more about tax allowances across the common types of investment accounts.
ETF investing in an ISA
ETFs (Exchange-Traded Funds) are one of the most efficient ways to invest through an ISA — and they’re at the core of every InvestEngine portfolio.
With ETFs, you can:
- Build a diversified portfolio with just a few investments (e.g. a spread across MSCI World, S&P 500, Nasdaq and FTSE 100)
- Keep costs low, with typical ongoing ETF charges tending to range from 0.07% to 0.25%
- Access global markets, from the UK and US to Europe, emerging markets and thematic sectors
- Reinvest dividends or receive them as income, depending on the ETF type (accumulating or distributing)
By holding ETFs inside an ISA, any gains you make, whether from growth or dividends, are protected from tax.
And with InvestEngine’s fractional investing, you can buy slices of ETFs from just £1. This means that as little cash as possible will sit uninvested for too long.
ISA investing: what else to know
You can’t carry forward your allowance
The ISA allowance resets every 6 April. If you don’t use your full allowance, you can’t carry it forward. Setting up a Savings Plan can help you invest regularly and use your allowance gradually over the year.
Withdrawals don’t reset your limit
With some ISAs, taking money out and putting it back in will reduce your ISA limit – InvestEngine operates flexible ISAs, where you can withdraw and reinvest without eating into your £20,000 allowance.
No joint accounts
ISAs are individual (the clue is in the name). If you’re investing as a couple, you can each open your own ISA and invest up to £20,000 each per tax year.
Some providers charge fees
ISA investing may be tax-free, but this doesn’t mean they’re fee-free. With InvestEngine’s DIY ISAs, investors pay absolutely no platform fees and no withdrawal fees (ETF costs do apply). This isn’t the case with some platforms.
Why use InvestEngine for your ISA?
At InvestEngine, we’re built for ETF investing. Our Stocks and Shares ISA is designed to be simple, cost-effective and powerful, with a long-term focus baked into everything we do.
You’ll get:
- Commission-free investing – We don’t charge a penny in dealing or platform fees on DIY portfolios (ETF costs apply)
- A choice of over 750 ETFs – Pick ETFs from leading providers like WisdomTree, Vanguard, Invesco and more.
- Effortless automation – Regular investing is a breeze with automated Savings Plans, supported by InvestEngine’s AutoInvest tech.
- Powerful investing tools – Track gains, automate rebalancing and reinvest your dividends
Whether you’re starting your first ISA or looking to grow your portfolio, we make it easy to invest in ETFs tax-efficiently.
Final thoughts
Yes, ISA gains are tax-free. When combined with a smart investing strategy, that tax break can make a real difference to your long-term returns.
Investing in ETFs through a Stocks and Shares ISA gives you access to global markets, low fees, and full control over your strategy, without having to worry about the impact of taxes on any returns.
Make the most of your ISA allowance this year, and give your money more room to grow.
Important information
Capital at risk. The value of your portfolio with InvestEngine can go down as well as up and you may get back less than you invest. ETF costs also apply.
This communication is provided for general information only and should not be construed as advice. If in doubt you may wish to consult a professional adviser for guidance.
Tax treatment depends on personal circumstances and is subject to change, and past performance is not a reliable indicator of future returns.