Types of saving

You can save tax by saving money in different ways.

There are two types of ISAs: a Cash ISA and Stocks and Shares ISAs.

Cash ISA

This works in exactly the same way as if you were putting money into a bank or building society savings account that pays interest - only you don’t pay any tax on the interest earned.

Savers can invest up to £7,200 per tax year in total, up to £3,600 of which can go into a Cash ISA.

People aged 50 and over can invest £10,200, of which £5,100 can be held in a Cash ISA. Those who are under 50 will see their limit raised from next April.

There are a number of different types of Cash ISAs - easy access, fixed rate and notice accounts. Rates vary significantly and it is worth shopping around for a deal that best suits your requirements. You can read our guide to Savings Accounts for more information in these types of accounts.

Could be suitable for

Somebody with a smaller amount to invest or whose spare savings fluctuate throughout the financial year.

Cash and Share ISA

A Cash and Share ISA allows you to invest up to the full £7,200, or 10,200 for those aged 50 and over, allowance.

Savers can also invest up to £3,600 into a Cash ISA and the rest into a Stocks and Shares ISA. People aged 50 and over can invest £5,100 in cash and the rest in stocks and shares.

Stocks and Shares ISAs allow choice across a range of direct shares, unit trusts, open ended investment companies (oeics), investment trusts, exchange traded funds and bonds. You can rely on a fund manager to pick the investments for you or make your own selections.

If you want to do it yourself then Self-Select Stocks and Shares ISAs bring a greater degree of flexibility for investors who understand and appreciate the risks and rewards of investing directly in the stock market.

You should always research the companies or stock markets you wish to invest in thoroughly.

Could be suitable for

Somebody with larger sums to invest, who also has knowledge of the stock market.