Having mentioned the tax benefits of dividend tax in my previous blog, here is one proviso about ISAs. Dividends from investments held in ISA accounts are taxed at 10%, but the tax deducted is not recoverable, as used to be the case. However, there are ways of overcoming this. For example, there are a number of highly reputable offshore-registered investment companies, which are subject to our UK regulatory system. Having offshore status means that the income is paid gross. Furthermore, if this income is received via an ISA, then there is no tax to pay. You should ask your adviser to take a very careful look at your investments to ensure that you are not holding investments outside of an ISA that would be more tax efficient if held in an ISA and vice versa, if considering a trade off between the two.
Too much emphasis is placed on ISAs in relation to basic-rate tax payers. You will see from my previous blog that basic rate tax payers only pay 10% tax on dividends anyway, and furthermore they have an annual capital gains allowance of £12,300 in the current tax year. So, one of the ways for a basic rate taxpayer to benefit is via offshore registered, UK listed funds.