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Tax Exempt Special Savings Accounts

 

A. Tax Exempt Special Savings Accounts

  1. Tax exempt special savings accounts (TESSAs) could be opened between 1 January 1991 and 5 April 1999. Anyone aged 18 or over was able to open one TESSA with an authorised bank or building society. Up to £9,000 may be saved over 5 years. Subject to that overall limit, up to £3,000 may be deposited in the first year, and up to £1,800 in each of the next 4 years.

  2. Interest and bonuses earned are tax free, provided the savings are left in the account for 5 years. No capital may be withdrawn during the 5 years without losing tax exemption. But interest may be withdrawn at any time less the equivalent of basic rate tax on savings income. At the end of 5 years, the account will automatically cease to be exempt from tax and any further interest will be taxable in the ordinary way.

  3. Investors who held a TESSA for five years were able to open a further TESSA with the full amount of capital deposited in their first TESSA, but not the accumulated interest. A large number of these follow-up accounts were opened in the first quarter of 1996 and matured in the first quarter of 2001, which explains the steep reduction in the number of accounts in that period.

  4. No new TESSAs could be taken out after 5 April 1999, but TESSAs taken out by 5 April 1999 are able to run their full five year course. Savers can continue subscribing to the TESSAs under the current rules and will be able to transfer their capital into the cash component of the new individual savings account when the TESSA matures.

B. Enquiries and Further Information

  1. Enquiries about statistics on TESSAs should be addressed to Yee Wan Yau, Analysis and Research, Inland Revenue, West Wing, Somerset House, Strand, London WC2R 1LB. A telephone enquiry number for this section is given in the 'Update calendar and enquiry points' page.