A TESSA, or 'Tax-Exempt Special Savings Account', is a five year savings account that benefits from no tax deductions on the interest accrued.

TESSAs were launched in January 1991 with new accounts being opened until 5 April 1999 when they were replaced by ISAs (Individual Savings Accounts). TESSAs are five year savings plans, with up to £3000 being invested in the first year and up to £1800 in each of the subsequent four years, to a maximum of £9000. All interest on a TESSA continues to be free of income tax, provided no capital and not more than 75 per cent of the interest is withdrawn until the end of the 5 year term.

Since 6 April 1999 it has not been possible to open a TESSA. However, it is possible to continue to add funds to a TESSA opened before that date, until the maturity date, without counting towards the annual ISA investment limits.

When your TESSA matures you can transfer the capital (not any interest), up to £9,000, into the cash component of a Mini or Maxi ISA, or alternatively into a TESSA Only ISA account. Again, this is on top of the normal annual ISA limits. The sole purpose of a TESSA Only ISA is to receive transferred TESSA capital.

In order to qualify for a TESSA Only ISA you must transfer the TESSA capital within six months of the date when the TESSA matured. TESSA interest and bonuses cannot be transferred to an ISA under the special rules.

If you are transferring a maturing TESSA from another bank or building society, you will need to provide your TESSA Maturity Certificate when you open your ISA.