How it works

ISAs allow you to protect up to £7,200 worth of assets from tax every year. This is a personal allowance.

For example a married couple would have a combined annual allowance of £14,400.

People aged 50 and over have seen their ISA limit raised to £10,200, of which £5,100 can be held in cash and the rest in stocks and shares.

The new limit will apply to people aged 50 and over in 2009-10, with effect from 6 October 2009, and to all from 2010-11 onwards.

It is not just cash we are talking about here. Anything from unit trusts, investment trusts, life insurance policies and share portfolios can be protected from tax using ISAs. (find out more about investment products

But to keep the taxman at bay there are certain rules you have to abide by.

• You have to be aged 16 or over to invest in a cash ISA and 18 or over to invest in a cash and share ISA
• You only get one bite at the cherry. You get an annual ISA allowance but if you don't use it you lose it.
• You can only invest up to £3,600, or £5,100 for those aged 50 or over, in cash, so to take up the full allowance you have to invest in other things such as stocks and shares.
• If you wish you can put your whole allowance into stocks and shares.