Yahoo Finance Six different types of Isa for 2017: which is best for you?
The Isa limit lifts to £20,000 from April, raising the amount people can save tax free. But since the Isa's launch in 1999 a whole raft of new types have been created, leading to a maze of options for savers.
Telegraph Money explains all the choices so you can work out which is best for you.
1. Cash
Isas are the simplest and most popular type, with around 80pc of Isas saved into cash. The full Isa limit of £15,240 for 2016-17 or £20,000 for 2017-18 can be saved each year.
All cash savings rates have been hit by the record low Bank Rate, and Isas are no exception, so the amount you earn on your cash is minimal. You can choose an easy-access account or tie the money up to get better rates.
The best easy-access cash Isa rate at the moment is from Paragon Bank and Teachers Building Society - both paying 1.05pc. Paragon's account can only be opened online. Teachers has a 90-day notice period for withdrawals and can be opened online or by post.
Both allow transfers from old Isas.
The best rate for opening an account in a branch is from Virgin Money, of 1.01pc. For fixed-term savings Virgin Money offers the best rate at one and five years - 1.05pc and 1.65pc. Darlington Building Society has the best two-year fix, at 1.25pc, and Leeds Building Society has the top three-year fix of 1.3pc.
All accounts mentioned are covered by the Financial Services Compensation Scheme (FSCS), which protects up to £85,000 per provider.
Be warned, many attractive rates only last for a limited period before the account is switched to the standard rate - currently 0.1pc for many. This means Isa money invested and left untouched for a few years is likely to earn next to nothing.
Cash Isas are not ideal for long-term saving. With inflation having risen to 1.6pc, no cash Isas offer above this rate - meaning savers are losing the spending power of their cash.
2. Stocks and shares
All or some of the annual Isa allowance can be invested in stocks and shares. This can be done directly in shares of companies or in bonds, or through funds or investment trusts, which are funds that are traded on the stock market. Investors can also use "passive" investments, which are low cost and track different markets, such as the FTSE 100.
Savers will first need to pick an Isa provider, also called a platform or fund shop. These charge a fee on top of any fund manager charge that you pay for funds, investment trusts or trackers.
Each fund shop Isas were introduced in 1999, as the new millennium was dawning. Left: Jaidev Janardana and Giles Andrews of Zopa charges different rates. Go here to see our tables of the cheapest fund shops for you. You will also find fund tips and ideas.
Within the Isa you will not pay capital gains tax - currently 10pc for basic-rate taxpayers and 20pc for higher-rate payers on any gains, not from residential property, over £11,000. Dividends and bond interest are also tax free.
Choose Telegraph Investor for fast, efficient online dealing in ISAs, SIPPS and Trading accounts.
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3. Junior
Junior Isas, or Jisas, are for those under the age of 18. Up to £4,080 a year can be saved into these Isas - or £4,128 from 2017-18.
At age 18 this money is then converted into an adult Isa, and the child takes control (and can do what they want with the money). The money cannot be withdrawn until age 18, unless the child is terminally ill.
As with adult Isas, the money can be split between cash or stocks and shares. The long-term nature of the accounts makes investments a better option, unless you're very risk averse.
If parents invest the full amount each year from the birth of their child - which is £78.46 a week - the money would grow to £105,357 by the child's 18th birthday, assuming a 5pc annual return and 0.75pc fees, according to figures from Fidelity.
A child born between September 2002 and January 2011 would have had a child trust fund, which can be converted into a junior Isa.
However, as children are not taxpayers, the Junior Isa may not be worth it. As non-taxpayers children can earn up to £17,000 on their savings before paying tax.
But, if the savings money for non-Jisa savings comes from parents or stepparents, only £100 in interest per parent can be earned before it is taxed at the parent's marginal rate. This applies only if the parent has already breached their personal savings allowance (see below).
The current top-paying Jisa account is from Coventry Building Society, at 3.25pc.
The next best rate of 3pc is offered by Nationwide, Halifax, TSB and Tesco Bank. In contrast, the best non-Isa children's savings accounts pay 4pc, from Saffron Building Society and Halifax - both fixed for 12 months.
A number of Isa providers offer stocks and shares Junior Isas, including Hargreaves Lansdown, AJ Bell, Bestinvest, Charles Stanley Direct, Fidelity and The Share Centre.
4. Lifetime
The Lifetime Isa, or "Lisa", is the biggest shake-up to the Isa system for years. The newest Isa has a dual purpose - to fund a first-time property purchase and save for retirement.
From April 6 2017 you can put £4,000 a year into a Lifetime Isa, which will be topped up with a 25pc government "bonus", making a total of £5,000. You have to be over 18 and under 40 to open an account but contributions - including the bonus - are paid until your 50th birthday.
If you invested the full amount from 18 to 50 you would receive £32,000 in government bonuses. However, you can only take out your cash penalty free from age 60 or if using it for a deposit on your first property.
Cashing in early for any other reason - apart from terminal illness or death - will see a 25pc exit penalty applied. This may seem like the Government merely reclaiming the bonus it paid but the charge is levied on the entire fund, including any investment growth. Experts have been highly critical of the early exit charge.
As with other Isas, you can put money in cash or invest in funds and shares. You'll be able to open an account on April 6 with Hargreaves Lansdown, Britain's biggest broker, or The Share Centre, the fund shop. Others plan to offer them.
For the 2017-18 tax year only, the bonus will be paid at the end of the year. This means no penalty will apply to withdrawals but likewise a property purchase will not benefit from the bonus in that year. From April 2018 the bonus will be monthly.
5. Help to Buy
Since December 2015 first-time buyers have been able to save into Help to Buy Isas. You can save £1,200 in the first month of opening an account and up to £200 a month afterwards.
The Government tops up your savings by 25pc. The minimum it will add is £400 - so you must save £1,600 or more - and the top-up has an overall cap of £3,000.
A couple can open two separate accounts. There is a £250,000 limit on properties purchased (£450,000 in London), while the Lisa has a £450,000 limit nationwide.
There has been widespread confusion over when the Help to Buy bonus is paid.
You will not be able to open a new Help to Buy Isa after November 30 2019. You can transfer a Help to Buy Isa into a Lisa in 2017-18 and it won't count towards the £4,000 maximum contribution for that year only.
6. Innovative Finance
Peer-to-peer savings, where investors lend money to individuals or businesses via an online platform, are currently subject to tax, although the income they generate qualifies for the personal savings allowance. But these investments can also be held inside an Isa - if the provider is regulated and authorised.
Unfortunately, regulation has proved to be a sticking point. Of all the established peer-to-peer lenders - such as Zopa, Funding Circle, Landbay, Lending Works, LendInvest and RateSetter - just Landbay and Lending Works are authorised and able to provide Isas.
Disorganisation on the part of the watchdog, the Financial Conduct Authority, is blamed for the delay, rather than any problems with the firms concerned. It is thought that regulation of the other larger providers will happen shortly, making more Isas available.
The flexible Isa feature that lets you take money out - and put it back in
How to bequeath your Isa tax breaks to your spouse
Since 2015 it's been possible for spouses to inherit each other's "Isa tax protection" when one of them dies.
Already confused? Just hang on - it gets clearer. As everyone knows, all spouses can bequeath savings and investments to each other with no tax to pay. However, before 2015, problems arose because the tax benefits of an Isa died with their owner.
So if a husband had £300,000 in an Isa and this was inherited by his widow, she would have to start paying tax on the income or gains these investments subsequently generated. Not only was this a tax disadvantage but it was also an annoyance: one of the great perks of an Isa is not having to fill in a tax return.
Now, though, spouses can inherit the taxproofing element of the Isa as well.
Say the husband died with his £300,000 Isa. He might have left the £300,000 investments to his wife, or he might not. That doesn't matter.
But what she does inherit from him is an extra Isa allowance to the value of his Isa account (in this case £300,000). This is called an "additional permitted subscription".
This additional allowance can be used once the wife has registered the death with her husband's Isa provider or providers.
But with the new personal savings allowance, do I really need an Isa at all?
Introduced last April, the personal savings allowance means that basic-rate taxpayers can earn up to £1,000 interest on savings free of tax. Higher rate taxpayers have a £500 allowance, and additional rate taxpayers (those earning more than £150,000) have no allowance.
A basic-rate taxpayer earning 1.05pc interest on their savings would need to save more than £95,200 before they pay tax, while a higher rate taxpayer could save £47,600.
So is it worth putting money into an Isa? Those with lower amounts to save will often find better interest rates than cash Isas in high-interest current accounts. But for wealthier savers Isas remain valuable.
This will be even more the case when savings rates rise. An Isa is also useful where savers become higher rate taxpayers and see their PSA is halved.
