Isa rules at a glance

You can invest up to £7,200 in a single tax year (up from £7,000 previously). The tax year runs from April 6 to April 5 and your annual allowance cannot be rolled into the next financial year, if you do not use it within that time.

Isas were introduced in April 1999, so those who have made full use of their annual allowances every year since then, will have sheltered £70,200 from the taxman - including the new 2008-2009 allowance.

Maxi and mini Isas have been abolished. Existing mini cash, tessa-only Isas and the cash component of maxi Isas will be re-classed as cash Isas. In the same way, mini stocks and shares Isas and the stocks and shares component of maxi Isa will be re-classified as stocks and shares Isas.

Personal equity plans (Peps) will become stocks and shares Isas.

You can open one cash Isa and one stocks and shares Isa each tax year. Up to £3,600 can be invested in a cash Isa. The remainder of your £7,200 allowance can be invested in a stocks and shares Isa. You do not have to put any money in a cash Isa: instead the full £7,200 can be invested in a stocks and shares account.

Various non-cash assets can be held within a stocks and shares Isa. These include unit trusts, open ended investment companies, investment trusts, exchange traded funds, shares or bonds.

As a result of the rule changes, savers who initially invested in a cash Isa can transfer that money into a stocks and shares account. However, you cannot move from equities into cash.

No. Cash Isas are like any other savings account and there are a number of different types - easy access, fixed rate and notice accounts.

Historically, notice and fixed rate accounts have tended to pay higher rates of interest than easy access deals, but that is not necessarily always the case. You can compare the latest Isa rates here.

However, as with standard savings deals, there are catches that you need to watch out for. Some accounts include introductory bonuses, so the interest rate drops after a while - there is no need to avoid such accounts, but you need to make a note to move your money elsewhere once the bonus period ends otherwise you could be left earning an uncompetitive rate of interest.

There is one fundamental difference between Isas and standard savings accounts: tax is not levied on the interest you receive from a cash Isa. Normally, higher-rate taxpayers pay 40% on any savings interest, while those in the basic-rate band pay tax at 20%.

Yes, you can transfer money without losing the tax-free status. However, you do need to be careful - if you close your existing Isa down and then look to move the money into another one you will lose the tax-break. You therefore need to make sure that your current provider treats it as a transfer and not an account closure.

Not all cash accounts accept transfers however, so this is something worth bearing in mind when comparing deals.

No. Some accounts have minimum investments, often £100 or £1,000 but many cash Isa rates are available on deposits of as little as £1 or £10. You can therefore pay money in whenever you have cash to spare or set up a monthly standing order and use your Isa allowance over the course of the tax year.

Most easy access accounts, as their name suggests, allow you to withdraw funds whenever you want. However, you will lose the tax-free status on anything you take out, so it is worth keeping your money invested in Isas for as long as possible and use any other savings first.