Watch your money grow
You can save regularly in an ISA or put in a lump sum, or both. In either case, if you leave your money alone for a few years it can grow surprisingly quickly. It will take around 10 years to double your money if it grows at 7 per cent a year, but just five if it grows at 15 per cent a year.

Tax benefits
Freedom from tax is the main selling point of an ISA. There is no tax to pay on any income you get from ISAs or any profits you make. The tax savings become significant as your ISA grows.

How much you can invest
You can put up to £7,000 into ISAs each tax year (to 5 April). You can invest a lump sum or save regularly, and you can split your ISA allowance in several ways.

• You can put up to £3,000 into a cash ISA to earn tax-free interest. That makes 6 per cent in an ISA equivalent to 7.5 per cent in a taxable savings account for a basic rate taxpayer, and 10 per cent for a 40 per taxpayer.
• You can put up to £1,000 a year into an insurance ISA, where you get tax-free profits from a fund that invests in a mix of shares, property and fixed interest.
• You can put the whole £7,000 into stock market investments, or a smaller amount if you take out a cash or insurance ISA as well.

The types of ISA

• Cash ISAs are the same as any other savings account, but you can take the interest tax-free. Most banks and building societies offer cash ISAs. You can transfer your money to another cash ISA or take your money out at any time, subject to any withdrawal restrictions.
• Stocks and shares ISAs are usually run by fund managers. Money you invest goes into a fund that itself invests in a basket of shares or fixed interest bonds. There is a huge choice of ISA funds available and you may want advice before making up your mind. You can move your money from one ISA manager to another if you think you have made a mistake, but there are costs involved. You can cash in whenever you like.
• Insurance ISAs are mostly a way of investing in a tax-free with profits bond. These invest mainly in shares, but are less volatile than pure stock market investments. They grow in value each year by the addition of a tax-free bonus (current rates range from about 5 to 7 per cent), and you may get a further bonus when you cash in.
• CAT marked ISAs: these are ISAs that meet minimum standards laid down by the government for charges, access and terms (hence CAT). They guarantee fair charges, easy access and decent terms.

CAT marks for cash ISAs

• Interest rates may not be more than 2 per cent below Bank of England base rate.
• People must be able to get at their cash within seven working days.
• Small transactions of £10 must be allowed.

CAT marks for share-based ISAs

• There must be only one charge, set at no more than 1 per cent a year.
• The minimum investment must be no higher than £50 a month or £500 lump sum.
• Funds must invest at least half their money in European stocks and shares.

CAT standards are voluntary, and most ISAs do not meet them. You will limit your choice severely by restricting yourself to CATmarked ISAs. Low charges are a significant advantage, though, so it is worth taking a look at CATmarked ISAs to see if you can find one that suits you.