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ISA (Individual Savings Account)

Posted on Apr 25, 2008 under TAX |

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ISA is used for efficient tax savings. ISA (Individual Savings Accounts) is the tax free savings accounts which is available for people to save money for their future. ISA is a financial product which is made for the purpose of saving the tax and is available in United Kingdom. The investments which are made in ISA are not liable to income tax or capital gain tax.

The ISA was introduced in 1999, which replaced the Personal Equity Plans (PEPs) and Tax-Exempt Special Savings Accounts (TESSAs). These were only existent for those who had already made the investment in them. ISA were made for a broader range of classes rather than only for the middle classes.

People can transfer funds from their ISA to get better rate of interest, which is done by investing in different ISA funds. The ISA transfer is absolutely free but there may be some charges that can be made by the manager when the fund exits. The usual time period for transferring funds from the ISA is about 4-6 weeks. All the funds have to be transferred if it is for the current year; otherwise some of the funds can be left behind in case of other accounts.

There are two types of ISA which are available:
- Mini ISA
- Maxi ISA
A person can only invest in either type of the ISA in the same financial year. He/She can opt for one Maxi ISA or two Mini ISAs each year. No investment can be made in both of them in the same year.

Although the ISA investment is tax free but the fund itself may be incur some tax, for this reason the individual should go through the documents or prospectus that is given.