What you have been led to believe is not what the person doing the leading was trying to lead you to believe, I think.
Generally when people talk about 'sheltering earnings' they are referring to ways of making income count as not taxable. For example, in the UK as an employee you can usually arrange for some childcare costs to be paid direct to a provider 'before tax', so they are deducted from your gross pay and don't contribute to your taxable income. In the past there used to be all sorts of fancy schemes (eg being paid in fine wine, or gold bullion) for employers/employees to collaboratively reduce the total tax burden, but generally those are all closed now except for a very few limited state-sanctioned schemes (eg the childcare mentioned above).
By contrast, an ISA is simply an envelope with the special property that gains within the envelope are completely free of tax (and do not contribute to any other tax calculations). The source of funds that enters the ISA is irrelevant - earned income, inherited income, dividends, it doesn't make any difference.
Your last paragraph is missing a clause or two, I think, but basically wherever you invest your money after getting it (having been taxed on it already) is irrelevant to how it was taxed in the first place.