The background of ISAs
Individual savings accounts (ISAs) were introduced on 6 April 1999, replacing the earlier Personal Equity Plans (PEPs) and Tax-Exempt Special Savings Accounts (TESSAs). ISAs are tax exempt cash and/or stocks and shares accounts under which any income received in the form of interest and dividends is free of tax, and on which there is exemption from capital gains tax on any capital growth. The estimated Exchequer cost of the tax relief for ISAs in 2015-16 was around £2.6 billion1 . Savings that are newly invested in an ISA account in a particular tax year are referred to in this publication as ISA ‘subscriptions’, although income earned in an ISA account remains tax free whether or not further subscriptions are made. The value of savings accumulated in an ISA account (as measured at the end of the tax year) including capital growth and any interest and dividend income retained in the account is referred to here as ISA ‘holdings’. Because the subscription limits are tax year based, ISA statistics are analysed using income tax years (running 6th April to the following 5th April).