Individual savings account (Isa)
Isa stands for Individual Savings Account, but you’ll rarely hear anyone say it in full and research has found many of us don’t even know what it stands for. It’s not an acronym that’s likely to win you points in a pub quiz, to be fair.
But they’re a very popular home for our savings pots, first introduced in 1999.
There are different types: cash Isas, stocks and shares Isas, innovative finance Isas, and Lifetime Isas.
Essentially, these are a tax-free way to save or invest. The Isa itself is not an investment, but a tax “wrapper” you put around an investment.
You can put money into one of each Isa type and you won’t pay tax on interest on cash or income or capital gains from investments. You get a new Isa allowance every tax year (6 April onwards). For the 2017/18 tax year the allowance is £20,000.
Some savers have become “Isa millionaires”, with account balances of over six figures.