Cn you explain to me an ISA

[Maggoty]

I know its stupid - coz I have one (with Northern Rock), but I don't understand the "tax Free" implications of an ISA. I have a savings account as well - do I get taxed on the piffling little amount of interest earnt on that. is it �3,000 before tax? If you add interest to that amount and it takes you over the �3000 do you get penalised?

Can anyone explain in laymans terms please. ta

[CheekyChops]

On a normal savings account you will pay tax on any interest you earn, however little it may be.

An ISA you earn the interest gross, ie you don't pay tax on it. It is the capital you put into the ISA that matters not the interest so even if the interest did take you over the �3000 threashold, it doesn't matter it is still tax free.

[Maggoty]

Thank you............. xx