If you pay income tax and have some spare money to save or invest you should know about Individual Savings Accounts (ISAs). ISAs have been available since April 1999 and they offer an attractive tax-free option to anyone aged 18 or over or 16 or over for cash ISAs (see qualifying investors below).
ISAs have replaced TESSAs which in turn had replaced PEPs (Personal Equity plans)
What makes them different from normal savings accounts?
With standard bank and building society savings accounts taxpayers normally have to pay tax on any interest earned on their money. The tax is deducted from the interest before it is paid out, reducing the amount received. Similarly, tax must be paid on the income and profits made from investments in the stock market like company shares or unit trusts.
However, ISAs are a kind of 'wrapper' to protect savings from tax, allowing you to put away a maximum of £7,200 (by way of regular or single savings amounts) each tax year in a range of savings and investments. You pay no personal tax at all on the income and/or profits received.
Tax savings
If you’ve taken full advantage of your allowance since ISAs began you’d have avoided up to £72,200 of your money from being taxed so far!
The main benefits of an ISA
• You don’t pay any personal tax (income or capital gains) on any investments
• You don’t need to include the income and gains from ISAs on your tax returns
• You can take money out of your ISA at any time without losing your tax benefits

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