NISAs and Basic Rate Taxpayers

There is a tax advantage for basic rate taxpayers if the NISA funds are invested in fixed interest securities and other investments that would otherwise be subject to basic rate income tax. This is because the NISAs are tax free. However, such investments might not suit your overall strategic investment needs.

For a basic rate taxpayer, the NISA provides very little real advantage where the funds are invested in UK equities. The NISA managers cannot reclaim the tax credit on dividend income and very few taxpayers have gains that exceed the annual Capital Gains Tax exempt amount.