So lets say I choose to invest my ISA allowance in Shares and Funds for 2013, and put £11,000 into the Joe Blogg’s Fund.

The fund performs very well and by the end of 2013 my investment is worth £15,000. This £5,000 is tax free.

In 2014, I decide to open a different ISA and invest a different £11,000 into a shares and funds ISA, investing in the Jeff Logs Fund.

The fund performs well also and by the end of 2014 this investment is worth £16,000. This £6000 is tax free.

But meanwhile…my Joe Bloggs Fund which was bought in 2013, has risen to £21,000. Is this £6000 gain now tax free…is my tax free investment for the life of the ISA or the life of the investment or what?!?

Because otherwise I could assume that in a period of 10 years, you could have 10 different investments bringing in tax free amounts of money…none of which were taxable?

Eugh i find this stuff very confusing.

Sounds like you understand it, tax free for life with a maximum on additional investment per year. Your estimate of returns is a little optimistic, though.

The fund performs very well and by the end of 2013 my investment is worth £15,000. This £5,000 is tax free.

Your sums don’t add up.

Why don’t me sums add up Gary?

Nick…yes sorry I was just trying to explain myself clearly.

15k -11k is 4k.
16k -11k is 5k

Or have I misread what you’re saying.

All ISA gains are tax free regardless of how much the gain (while the investment remains in an ISA wrapper).

This is correct.

Oops..yes Gary you’re right. It’s late where I am. Sorry.

So final question for the evening. If I buy £10,000 BP shares under an ISA wrapper in 2013 and they are worth £13,000 in 2016…can I then buy £13,000 of GlaxoSmith shares in 2017 under the same ISA wrapper and not be taxed on them?

Allthpies – thanks for being concise with me. Find this stuff very hard to get clear answers on the internet.

I’d let you off once, but not twice 🙂

You can use your full ISA allowance every tax year regardless of how much gain/loss any previous years ISA has made.

The annual limit is £11520 though.

OK. Thanks chaps. I think I understand.

Sounds like you understand it, tax free for life with a maximum on additional investment per year. Your estimate of returns is a little optimistic, though.

You do know there are several hundred millionaire ISA holders? There was an article about it in the Sunday Times a few weeks back. They invested the max amount in share ISAs for the 10 years or so they’ve been running but managed to trade their shares such that their funds are worth over a million!