What is an ISA?

ISA is short for Individual Savings Account, a type of tax free savings or investment scheme that the government introduced in April 1999 to replace Personal Equity Plans (PEPs) and Tex Exempt Special Savings Accounts (TESSAs).

They were introduced as a way of encouraging people to save money, with the main incentive being the fact that any growth in capital is tax free, be it through interest accrual or increases in the value of any underlying assets.

ISAs are essentially a wrapper that can invest in one of three things:

• Financial instruments, such as stocks, shares, unit trusts, and certain corporate bonds
• Cash
• Life assurance

Investors can put money into either:

• One maxi ISA per tax year, Or
• Up to three mini ISAs per tax year, providing each mini ISA invests in a different type of investment.