What is an individual savings account?
Answered 11 March 2026
Based on the retrieved sources, here is a comprehensive answer:
What is an Individual Savings Account (ISA)?
What the law says
The legislative framework for Individual Savings Accounts (ISAs) is found in Chapter 3 of Part 6 of ITTOIA 2005, which grants the Treasury power to make investment plan regulations. These regulations may specify the kinds of investments that may be made under a plan, provide for a plan in the form of an account, and authorise the ways in which subscriptions to an account are to be invested.
The detailed rules governing ISAs are set out in the Individual Savings Account Regulations 1998 (SI 1998/1870), made under those powers.
HMRC guidance / practice
An ISA is a tax-advantaged savings and investment account with the following key features:
- Tax exemption: Investors pay no tax on any income they receive from their ISA savings and investments. They do not have to declare income and capital gains from ISA savings and investments, or even inform HMRC that they have an ISA.
- Start date: ISAs began on 6 April 1999, replacing Personal Equity Plans (PEPs). PEPs could no longer be opened after 5 April 1999.
- Annual subscription limits: The regulations set out rules for investors, including limits on the amounts that can be invested in each tax year.
- Types of ISA: ISAs can hold various investments. The separate insurance ISA was abolished on 5 April 2005; since 6 April 2005, life insurance policies can be held within a stocks and shares ISA, or since 6 April 2017, within a Lifetime ISA.
- Junior ISA: A Junior ISA is a long-term savings or investment account in the beneficial ownership of a child, from which only the child may withdraw funds after their 18th birthday. It may be opened for a child born on or after 3 January 2011.
- Shares in an ISA: Shares held in an ISA form part of a deceased's estate.
Citation sources
Part 6 Exempt income Chapter 3 Income from individual investment plans Investment plans 695 1 Investment plan regulations may specify the kind of investments which may be made under a plan or which may be made by particular descriptions of individuals under a plan. 2 They may— a provide for a plan in the form of an account, and b authorise the ways in which the subscriptions to an account are to be invested. 3 They may— a provide that plans are to be such as are approved by the the Commissioners
The separate insurance Individual Savings Account (ISA) was abolished on 5 April 2005. Since 6 April 2005, provided certain conditions are met, life insurance policies can be held within the stocks and shares ISA, or, since 6 April 2017, within the Lifetime ISA. There is detailed information on ISAs in the ‘ISA managers’ guidance’ published on gov.uk. Insurers can find the guidance useful to check if a life insurance policy can be included in an investor’s ISA. The ISA Regulations themselves are
Shares held in an Individual Savings Account (ISA) form part of the deceased’s estate. Any sales of these shares should be made by the appropriate person.
Probably the most common type of exemption from tax on interest is where the income arises in an individual investment plan. Chapter 3 of Part 6 of ITTOIA05 contains the powers for the Treasury to make regulations for exemptions for certain investments. Two sets of regulations have been made under ITTOIA. Personal Equity Plans (PEPs) (SI469/1989). Individual Savings Accounts (ISAs) (SI1870/1998). Similar powers are provided by The Child Trust Fund Act 2004 under which the following regulations h