Glossary
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Tax Exempt Special Savings Account (Tessa)

Definition

A five year tax free savings scheme for people aged 18 and over, introduced by the government in January 1991 and operated by banks and building societies, but terminated in 1999.

The maximum amount which could be paid into such schemes over the five year life of the TESSA was £9,000 according to the following schedule:

1st year, £3,000
2nd year, £1,800
3rd year, £1,800
4th year, £1,800
5th year £600

TESSAs were discontinued on 5th April 1999 although those taken out before then are allowed to run their full five year term. If you own a TESSA, you can do three things with it when it matures:

  1. You can withdraw the interest and capital free of tax, and either spend it or invest it elsewhere.
  2. You can move the capital into a 'Matured TESSA Account'. The interest earned in the account after the maturity date will be taxable.
  3. You can move the capital (but not the income) into an ISA account where it can continue to grow tax free. It can either be paid into a special Tessa-only ISA account (a TOISA) or it can be paid into a cash only mini ISA. The move has to be made within 6 months of the maturity of the TESSA.