What is an ISA account?

ISA stands for Individual Savings Account. It's a tax-free savings account available to UK residents.

ISAs typically offer very competitive interest rates, because no tax is charged on the amount saved.

You can also invest money into stocks and shares through an ISA, although returns on these investments may be taxed.

How much can I save on an ISA?

At the time of writing, you can save up to £5,640 in cash. This can be topped up to £11,280 with stocks and shares, or you can invest the full £11,280 in stocks and shares.

However, from April 2013 the cash limit will be increasing to £5,760 - or up to £11,520 with stocks and shares.

Junior ISAs

Junior ISAs are available for people under the age of 18 - although children born between 1st September 2002 and 2nd January 2011 won't be eligible, because they are eligible for a Child Trust Fund instead.

The tax-free limit on a junior ISA is currently £3,600 (increasing to £3,720 from April 2013).

Unlike adult ISAs, there are no limits on what proportion of this can be saved in cash or invested in stocks and shares.

Will I have easy access to my cash?

It depends on the account. Some offer easy access to your money, while others 'lock' the money away for a period of time (i.e. a few months or years).

You will normally find higher interest rates on ISAs that lock your money away for a while. You can withdraw your cash if you really need to, but you will lose any interest earned - so don't choose this type account if you think you might need the money for emergencies.

However, if you already have an easy-access savings account for emergencies, a fixed ISA can be a great way to increase the amount of interest you earn.