An individual savings account (ISA) is a savings account on which the return is tax-free, and which need not be declared in the investor’s tax return. There are two components: (i) cash; and (ii) stocks and shares, and life assurance policies.
An investor has an overall annual investment limit which is £11,880 between 6 April 2014 and 30 June 2014 (previously £11,520) of which no more than £5,940 (£5,760 previously) can be in cash. From 1 July 2014 ISAs are to be replaced by “New ISAs” (NISAs) when the limit will increase to £15,000, which can be invested in either cash or shares. All of it can be in stocks and shares, and life assurance policies, if the investor wishes. The ISA limits are indexed annually in line with the consumer price index. See also Junior ISA.