Individual Savings Accounts (ISAs)

ISAs were introduced on 6 April 1999 to encourage more people to save. They replaced PEPs and TESSAs for new savings. ISAs were designed to appeal to a broad range of the population but have been criticised as confusing because of the range of components available and how they interact.

There is no tax liability on the return from ISA investments, which can comprise cash (up to £3,600 p.a.), or equities (up to £4,000 p.a.) or insurance (£1,000 p.a.).

From April 2008, the rules are simplifying and the annual allowance increasing:

• ISA investment allowance raised to £7,200.
• Up to £3,600 of allowance can be saved in cash.
• Mini and maxi ISAs will no longer exist.
• cash ISAs, TOISAs will automatically become cash ISAs.
• PEPs will automatically become equity ISAs.
• cash ISA savings may be transferred to equity ISA

View HMRC overview of ISA changes here.