Question:

Are ISAs Shariah compliant?

In the Name of Allah, the Most Gracious, the Most Merciful.

As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.

The Answer:

Individual Savings Account (ISA) were introduced in 1999 by the British Government.  ISA’s are a tax-efficient wrapper for savings and investments.  There are two types of ISA:
1)    Cash ISAs
2)    Stocks and shares ISAs

Conventional Cash ISAs are non-Shariah compliant as they are typical interest-based savings accounts.  Hence, conventional cash ISAs are non-Shariah compliant and not permissible.

Conventional stocks and shares ISAs can be invested in shares, bonds, funds or investments trusts.  Any stocks and shares ISA available in the market must be screened for Shariah compliancy before a ruling can be passed on the permissibility of a particular stocks and shares ISA.

There are ISAs in the market certified as Shariah compliant.  They have been approved by the respective Shariah boards of Islamic financial institutions.  One may approach such Shariah boards and get clarity on these products and follow their approvals of such products.

And Allah Ta’ālā Alone Knows Best
Mufti Faraz Adam,
www.darulfiqh.com
 
DISCLAIMER:
The views and opinions expressed in this answer belong only to the author and do not in any way represent or reflect the views of any institutions to which he may be affiliated.
Arguments and ideas propounded in this answer are based on the juristic interpretations and reasoning of the author. Given that contemporary issues and interpretations of contemporary issues are subjective in nature, another Mufti may reach different conclusions to the one expressed by the author. Whilst every effort has been taken to ensure total accuracy and soundness from a Shari’ah perspective, the author is open to any correction or juristic guidance. On the event of any juristic shortcomings, the author will retract any or all of the conclusions expressed within this answer.
The Shari’ah ruling given herein is based specifically on the scenario in question.  The author bears no responsibility towards any party that acts or does not act on this answer and is exempted from any and all forms of loss or damage.  This answer may not be used as evidence in any court of law without prior written consent from the author.  Consideration is only given and is restricted to the specific links provided, the author does not endorse nor approve of any other content the website may contain.