There are a few essential things you need to know, such as how much your annual allowance is, and where exactly you can invest it. Our guide tells you everything you need to know.

What are ISAs?
An ISA (individual savings account) is a tax-free savings vehicle. The benefits of having such an account are that all returns are tax free. This allows people to protect the interest on their savings from the tax-man, and thus get a higher rate of return on their money.

How much can I put in an ISA?
Since 6th of April 2012, you can put up to £11,280 in an ISA. This can comprise of both cash and stocks and shares.

Up to £5,640 of the yearly allowance can be saved in a cash ISA, with the remainder being housed in a stocks and shares ISA. Alternatively, the whole balance can be used in a stocks and shares account.

You do not need to have both cash and stocks and shares ISAs with the same provider.

How many ISAs am I allowed?
You can open one cash ISA and one stocks and shares ISA each tax year. You can therefore hold multiple cash ISAs, as long as they were opened in separate tax years.

Most people are encouraged to save as much as possible each year as any unused part of the yearly allowance cannot be carried forward into the next tax year.

However, any money placed in the ISA before the end of the tax year will remain protected for as long as it is kept in the tax-free account.

The ISA is effectively a tax wrapper like a pension, so you can choose the underlying investments your money is invested in.

Various non-cash assets can be held in a stocks and shares ISA, including unit trusts, investment trusts, open ended investment companies, bonds, individual shares and exchange traded funds.

Are all cash ISAs the same?
No, they are not. Cash ISAs are like any other savings account and there are a number of different types – easy access, fixed rate and notice accounts.

Rates do vary – so it’s always a good idea to shop around online and see which providers are offering the best rates for your savings. Also keep an eye out for details on how to remove your savings should you wish to.

ISAs are similar to a savings account, but with the added benefit that you do not pay tax on the interest you earn.

When comparing cash ISA deals, there are several things to bear in mind. As with standard savings accounts, fixed rate deals often prevent you from accessing your money during the fixed term.

So if you do wish to break into your savings at some point during the term, you will not be able to.

Many of the leading easy access accounts include rates of interest that contain introductory bonuses, so the account may lose its competitiveness once that period – usually a year – ends. You also need to be aware of the rules governing moving your money between ISA providers.

How do I transfer between ISA accounts?
You can transfer previous year’s savings to a new provider, regardless of whether or not you have opened a new one for this tax year.

If you wish to, you can transfer all of your savings, including money you have put away this tax year into a cash ISA with a new provider.

If you do consider putting all your money from previous ISAs into one account, make sure you check that you are actually better off in doing so.

ISAs that allow transfers often tend to pay lower interest rates than those that don’t, so it can make sense to hold two separate ISAs each year: one for older savings which you can no longer pay into, and one for the current year’s ISA allowance.

REMEMBER – you cannot transfer money between ISAs yourself. This process has to be done via your bank or building society. If you attempt to do so yourself, this will result in you forfeiting your money’s tax-free status.