ISA (Individual Savings Account) was introduced on 6th April, 1999 for the United Kingdom citizens. It refers to a financial product designed for, as the name suggests, investments and savings. It appeals to the general public as it has a favorable tax status. It connotes monies which are contributed after tax income and the same is not subject to income tax within a holding or once withdrawn. There are two broad spectrums of ISA namely, ISA cash and ISA stocks and shares.

ISA stock and shares enable us to put our cash into a wide array of investments ranging from corporate or government bonds, investment trusts, unit trusts to open-ended investment trusts. ISA stocks and shares can be viewed as ‘tax free cocoons’ within which we can hold any investment we may prefer, and the same may be sheltered from tax. Furthermore, shares in individual companies can also be placed in an ISA which is usually termed as self-select ISA, which are managed by stock brokers.

However, there are some charges which are incurred. They vary depending on what we are investing in, and they are however similar to the charges we would pay if we were investing outside an ISA. There are two huge advantages of placing our investments and savings in ISAs. First, any increments on the share price are not eligible for capital gains tax and secondly, all our tax on bonds can be reclaimed. Protecting our investments from the taxman has never sounded so good. Finally, if we can consolidate our annual ISA allowances, we are in essence creating a sizeable tax-free pot.