Get the lowdown on ISA INVESTMENTS

Editor of MoneyWeek.com Kalpana Fitzpatrick shares advice on how to make ISAs work for you

- KALPANA FITZPATRICK

Whether you’re saving for a new extension or simply for a rainy day, having the backing of a strong savings pot will help – and knowing how to make the most of your ISA allowance can help you save in a tax efficient way.

What is an ISA?

Put simply, an ISA (individual savings account) is a tax efficient savings account, where any money you earn in interest or investment return is not taxable.

There are basically two categories of ISAs – a cash one, where you will earn interest just as you do in a cash savings account, and stocks and shares, in which your money is invested in the stock market.

Cash ISA

If your aim is to save for the short to medium term, a cash ISA makes sense. When considering one, shop around for the best interest rate. If you get a variable/flexible cash ISA, be aware the rate can change, but you can withdraw your money and then replace it without it affecting the tax free allowance.

Fixed rate ISA