Buyers' Guide - ISAs

If you don't want to pay tax on your savings or investments, you'll want an ISA. But there are lots of different types so spend some time choosing the right one for you. Let Moneywise help with our Buyers' Guide.

Say the word 'ISA' and most of us think of tax-free savings accounts. But billions of pounds are also invested in stocks and shares ISAs. So what should you know before you make your choice?

Because ISAs are so tax-efficient there are limits on how much you can pay in every year.

If you've not used your ISA allowance by April 5th, you lose it. And once you've paid in the maximum, you can't top your ISA up, even if you've taken some money out.

A cash ISA is simply a tax-free savings account. And while you can get a good return on your money, most banks drop the interest rate after a year or so. So you'll have to transfer it if you want a better return.

Check out our regular ISA updates for the best deals.

With an investment ISA, you can use your allowance to buy shares or investment funds and you don't pay income or capital gains tax when you come to cash it in.

These ISAs usually offer a better return to long-term investors, but you need to be happy with the risk.

Don't invest in a stocks and shares ISA just to use up your allowance, and don't assume all investment funds are the same.

Some are much riskier than others and some have higher fees. So before you part with your money, do your research and make sure you can leave your cash invested for at least five years.

And, if you're comfortable with the risk, you can transfer cash ISAs into investment ISAs, but think carefully first as you can't transfer them back.