Individual Savings Account (UK tax)
An Individual Savings Account (ISA) is a tax-advantaged savings or investment account under which eligible income and capital gains are generally exempt from UK tax while held in the account. Tax-free ISA interest is distinct from taxable savings interest charged at a nil rate within the savings income nil-rate band. Subscription limits and eligibility depend on the tax year and ISA type.
Worked example
During 2025–26, an individual receives £300 interest within a qualifying cash ISA and £700 taxable interest in an ordinary savings account. Assuming the accounts qualify as described, the £300 ISA interest is tax-free and does not use the savings nil-rate band; the £700 is considered separately under the individual’s income-tax computation.
Common mistake
Including tax-free ISA interest within taxable savings income or assuming all National Savings and Investments products are tax-free.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | TX (UK) | Supporting | June 2026–June 2027 |