From Morningstar:

This week we explored the ins and outs of exchange traded funds (ETFs), covering income, bonds, global equity options, and more. But what about the tax implications? ETFs held in an ISA wrapper shield you from capital gains and dividend taxes. Be mindful of inheritance tax implications and seek advice if needed.

While ETFs in an ISA wrapper offer tax-free gains and dividends, they are still subject to inheritance tax. If you breach your ISA limit, you may face capital gains tax of 10% or 20%. Consider the reporting status of your ETFs, which could impact the tax treatment you receive. Seek advice if unsure.

Investors breaching their ISA limits may face capital gains tax rates of 10% or 20%. Ensure your ETFs have UK reporting fund status to benefit from lower tax rates. Dividend income from ETFs is not covered by the personal savings allowance and is subject to varying tax rates based on your income tax status.

While ISAs offer tax advantages, some ETFs may not pay dividends, reducing tax liabilities. Seek expert advice to minimize tax exposure and optimize your investment strategy. Consider the various tax implications of ETFs, including capital gains tax, dividend tax rates, and inheritance tax.



Read more: ETFs and Tax: What You Need to Know