The individual Savings Account (ISA) is a product intended for the residents of UK so that they are able t invest and save with a better tax standing. Money is not subjected to capital gains tax or income tax while withdrawal or holding but it is contributed from the given after tax money. In other words we can say that ISAs are very efficient way to save or invest while paying less tax. Mostly all the contributions must be in form of cash and there is no restriction of any type while withdrawing the money and a wide variety investments can be done, but funds cannot be used as security loan. Though it is not a pension scheme but is very useful as a replacement to a pension as capital can be drawn down at a much faster rate than it is permitted in pension.
Individual Savings Accounts came into existence replacing the previous products namely; Personal Equity Plans (PEPs) and Tax-Exempt Special Savings Accounts (TESSAs). ISAs are technically designed to appeal broader number of population better dwelled by a Halifax ISA than these products, which claimed to be beneficial to the middle class. There are two categories of ISA available to the residents; ‘Adult ISAs’ which offered to UK residents aged over 18 and ‘Junior ISAs’ are offered to individuals between 16 and 18 of age.
There are two broad types of ISA, ‘Cash’ and ‘Stocks and Shares’. A cash deposit has a very similar structure to other ordinary savings account; the only difference is the tax free nature of ISA. Whereas ‘stock and shares ISA’ is a very different kind of account, it allows the investor to put his money into different types of investment such as unit trusts, open-ended investment companies and even investment trusts, as well as government bonds and corporate bonds. This means your investment can flourish or even reduce along with all these facilities and individual can also buy shares and put them into an ISA and this sub category of stock and shares ISA is named ‘Self-Select stocks and shares ISA’
All these flexibilities, tax free nature, long term benefits and even the fact that an account holder would not lose any government contributions when he switches to ISA provide a very good and sturdy reason for any UK resident to look into ISAs.