Tax-Exempt Special Savings Account
- Tax-Exempt Special Savings Account
In the UK, the Tax-Exempt Special Savings Account (TESSA) was one of a number tax-free savings accounts. The TESSA was announced by John Major in his only Budget as Chancellor of the Exchequer in 1990 ("a budget for savings"). The TESSA was intended to be a low-risk complement to the personal equity plan (PEP) which would be attractive to a wider range of savers.
Qualification
An individual aged 18 or over was able to open a TESSA with a bank, building society or other financial institution from 1 January 1991 [ [http://www.investmentuk.org/investors/glossary/t.asp IMA Glossary Definition of a TESSA] ] to 5 April 1999. Interest on the TESSA was free from UK income tax. The favourable tax treatment of a TESSA lasted for 5 years, and it was possible to invest up to £9,000, with a maximum investment of £3,000 invested in the first year and £1,800 in each of the second to fifth years (although, if the maximum was invested in the first four years, only £600 could be added in the fifth year). Withdrawals were permitted within the first 5 years: tax relief was clawed back if any of the invested capital was taken out; withdrawals of interest did not trigger a clawback of the tax relief.
Development
'Follow-on' TESSAs were introduced in 1995 to permit all of the capital (but not the tax-free interest) from an original TESSA to be 'rolled over' into a new TESSA. Other than permitting all of the capital in the original account to be invested in the first year, which could easily exceed the usual £3,000 first-year limit, a 'follow-on' TESSA was subject to the same conditions as any other TESSA.
Phasing out
TESSAs were replaced from 1999 by individual savings accounts (ISAs). The final TESSAs matured on 5 April 2004, but the original capital (but not the tax-free interest) could again be 'rolled over' into a new notional income tax-free investment through use of a TESSA only ISA (TOISA). The TOISA was a form of cash ISA which can be opened using either capital that was originally invested in a TESSA and that has not been withdrawn, or with funds transferred from another TOISA.
From 6th April 2007 there was no practical difference between TOISAs and cash ISAs and transfers into cash ISAs have been permitted. On 5th April 2008 TOISAs ceased being legally distinct and are now completely interchangeable with cash ISAs.
References
Wikimedia Foundation.
2010.
Look at other dictionaries:
Tax Exempt Special Savings Account — Tessa A UK savings account with a bank or building society, introduced in January 1991, in which savers were allowed to invest up to £9000 over a five year period with no tax to pay on their interest, provided that special conditions were met.… … Accounting dictionary
Tax Exempt Special Savings Account — Tessa A UK savings account with a bank or building society, introduced in January 1991, in which savers were allowed to invest up to £9000 over a five year period with no tax to pay on their interest, provided that special conditions were met.… … Big dictionary of business and management
Tax Exempt Special Savings Account — ( TESSA) A savings account which generates tax free interest for the investor. The account must be kept open for five years, at which time it must expire. The maximum amount that may be invested in the account is £9,000 in total over the five… … Financial and business terms
tax-exempt special savings account — /tæks ɪgˌzempt ˌspeʃ(ə)l seɪvɪŋz əˌkaυnt/ noun formerly, an account into which money can be placed to earn interest free of tax, provided it is left untouched for five years. Abbreviation TESSA … Dictionary of banking and finance
tax exempt special savings scheme — (TESSA) A special bank or building society savings account that offered tax free interest provided that the account was maintained for a fixed period of five years. TESSAs were replaced by individual savings accounts (ISAs) from 6 April 1999… … Law dictionary
Individual Savings Account — An Individual Savings Account (ISA; pronounced /ˈaɪsə/) is a financial product available to residents in the United Kingdom. It is designed for the purpose of investment and savings with a favourable tax status. Money is contributed from… … Wikipedia
individual savings account — (ISA) A tax exempt savings scheme for individuals introduced in 1999 which replaces tax exempt special savings schemes (TESSAs) and personal equity plans (PEPs). For further information, see the HM Revenue & Customs website … Law dictionary
Individual Savings Account — ISA A savings portfolio for small investors introduced in the UK in 1999. It replaced personal equity plans (PEPs) and Tax Exempt Special Savings Accounts (TESSAs); ISAs entitle individuals to save up to £7000 per year free of tax. The savings… … Accounting dictionary
Individual Savings Account — ISA A savings portfolio for small investors introduced in the UK in 1999. It replaced personal equity plans (PEPs) and Tax Exempt Special Savings Accounts (TESSAs); ISAs entitle individuals to save up to £7000 per year free of tax. The savings… … Big dictionary of business and management
individual savings account — ( ISA) The new tax exempt savings scheme launched in April 1999 as a replacement for the personal equity plan ( PEP) and tax efficient special savings scheme ( TESSA). ISAs can be used to invest in a very wide range of investments and consist of… … Financial and business terms
