Treatment of income units within an ISA

A question about : Treatment of income units within an ISA

Let's say that a number of units from a unit trust are held within an ISA, with a mixture of Accumulation units and Income units.

Would all the income from the income units be treated as free from income tax?

Would the situation change if they were to be held on account or immediately reinvested and would such a reinvestment count towards the annual subscription limit?

I'm sure this is fairly basic, but I'm struggling to get my head around it!

Best answers:

• Anything within an ISA is tax free.
  Only new cash deposits that you make count towards your annual allowance.
• Just the clarify this a bit, you will have no future income tax to pay, however share dividends will be taxed at source (10%), and this will get paid, even if they are in an ISA. If you income comes from Bonds, then these will not be taxed, and sometimes you can get a tax reclaim coming into your ISA, depending on what you have invested in.
• Dividends aren't taxed at all inside an ISA. The 10% tax/10% tax credit game just happens outside the ISA.
• Dividends aren't taxed at all, except for higher rate taxpayers; that is, no tax is withheld. The amount declared as a dividend is the amount received by shareholders. However, for historical reasons, the payment is deemed to be 10/9 of that amount less a 10% tax credit, which is not reclaimable, but can be deducted from higher-rate tax.
• As I understand it ...
  A company pays corporation tax and holders of shares in the company (outside an ISA or Pension) get a 10% tax credit which can be used to offset income tax due in the year (for Basic Rate tax payer, the tax due is equal to the tax credit so there is generally nothing to do).
  When shares are held in an ISA (or Pension) the corporation tax is still paid but individuals don't get the 10% tax credit. Additionally, high rate tax payers (and Extended rate tax payers) have no further income tax to pay regardless of other income.