A savings portfolio for small investors introduced in the UK in 1999. It replaced personal equity plans (PEPs) and Tax Exempt Special Savings Accounts (TESSAs); ISAs entitle individuals to save up to £7200 per year free of tax in the form of cash, stocks and shares, or a combination of the two. Of this up to £3600 can be saved in cash with one provider; if this is transferred to a stocks-and-shares ISA within the same year, up to another £3600 cash can be saved that year. ISAs were formerly available in two main forms: maxi-ISAs, which had to include shares and be supplied by a single provider; and mini-ISAs, in which each component could be supplied by different providers. This distinction was abolished from April 2008. ISAs can be cashed in at any time without loss of the tax relief, which includes exemption from personal income tax and capital gains tax. See also ISA mortgage.
http://www.hmrc.gov.uk/leaflets/isa-factsheet.pdf More information about ISAs from the HMRC website
Subjects: Financial Institutions and Services — Accounting.