What does ISA mean?

Answer 1

ISA is the abbreviation for 'Individual Savings Account'. It is an account in which you earn interest on the amount deposited, like a normal bank account, with the important difference that the interest is not taxed.

This type of account was created by the government to encourage people to save more. There is a limit of £7,200 that can be invested in an ISA per year, to stop you dodging tax on all the interest on your savings. Only half (£3600) of this can be cash, the other half must be stocks and/or shares.

Although ISA interest rates tend to be lower than normal high-interest saving account rates, the after-tax interest will be higher with the ISA if the saver is in a higher tax band. If you don't pay tax (earnings under the threshold or if you are a full-time student), then there is no benefit to an ISA over a normal savings account.

Answer 2

ISA stands for Individual Savings Account. Its an instrument to invest in tax saving plans for UK citizens. There is a maximum limit set by FSA on the investment one can make under this plan.