The government in a bid to encourage people to save more money introduced the Individual Savings Account (ISA) scheme in 1999. It enables people to invest up to a set amount each year without incurring tax on the interest or income generated from it. Although this sounds pretty simple, there are some rules about how and what can be saved. This guide provides an overview of ISAs, and what you need to consider before taking one out and making the most from your savings.

Firstly you should always seek guidance from a financial expert before making any decisions. You can either speak to your bank or an independent financial advisor, who will assist you on the right type of investment.

Under the government’s regulations, you are entitled to invest up to £7,200 per financial year (April to March) in a combination of ISAs without incurring any tax on the interest you have gained, or from any capital growth or dividends made from stocks and shares. As of October 2009 the limit for over 50s was bumped up to £10,200.

There are two ways to invest your money in an ISA. These are cash savings or on stocks and shares. These can be:

1. The Maxi ISA

This enables you to invest the full annual amount of £7,200 within the same bank or other provider. The options available under this type of ISA are to either invest the whole amount in stocks and shares and life assurance, or up to £3,600 in a cash savings ISA, and the remainder in stocks and shares and life assurance.

2. The Mini ISA

Here you can take out two mini ISAs in one year under different providers, so you can shop around – one for cash, one for stocks and shares. The investment limit on the mini cash ISA is £3,600 and the remainder can be invested in a stocks and shares ISA.

How To Find The Best ISA Deals

These days taking out an ISA is easy, because there is so much choice available to customers. People would generally think of speaking to their bank or building society, however retailers and supermarkets have also become providers. With so much choice, it pays to shop around for the best deal, as not all of the providers will be offering the same rates of interest. There are also costs associated with opening an ISA, for instance some providers will charge for managing funds, so it is worth doing your homework.

For help, websites like ISADeals.co.uk or Money.co.uk can provide you with information on how and where to find the best ISAs. Legal & General’s site can provide a particularly useful example of what’s typically available in the way of ISA options.