How to make the most of stocks and shares ISAs in 2016/2017.

In this article you'll learn:

• What ISAs are and what you can do with them.
• What to look out for when choosing an ISA.

With interest rates so low, savers are having a tough time. But the UK government's ISA (individual savings accounts) schemes mean there is an attractive, tax-free, way of investing. It seems easy - but is there a catch? As a new tax-year begins, and following a host of ISA announcements in the recent Budget, our Q&A guide explains all...

For more than 150 years the UK government has offered a number of nationalised savings options - and the benefits are easy to see: you get to save some cash while the government gets a handy loan. In the late 90s ISAs replaced two previous government-backed financial products - you might remember PEPs and TESSAs. Today, there are several types of ISA investment options, each of which offers the potential for a financial gain.

ISAs are easy to open, have a wide variety of investment choices and in most cases you won't need to pay any tax. Here's our ISA Q&A to help you get started:

Q: Are there different types of ISAs available?

A: Yes. You can invest in a cash ISA, a stocks and shares ISA or an Innovative Finance ISA.

Cash ISAs generally offer low returns but are a low-risk investment. Stocks and shares ISAs are likely to be more volatile but can provide higher returns. Innovative Finance ISAs, which have only just been introduced, sit between the two (although the exact risk level will depend on the specific product).

You can split your investment between the different types, as long as you don't exceed the total investment limit. What's the investment limit? That leads us nicely to the next question...

Q: How much can I invest in a stocks ISA?

A: In the tax year 2016-2017 you can invest a maximum of £15,240 into an ISA. The tax year runs from April 6 to April 5 the following year.

Q: Stocks ISAs sound like a great opportunity - are they a good choice?

A: Stocks and shares ISAs might be suitable for those comfortable with the risks of investing, as the gains are likely to be higher than normal cash ISAs.

Q: Who can open an ISA account?

A: Any UK resident, but you need to be 16 or over for a cash ISA and 18 or over for a stocks and shares ISA.

Q: Are there ISA options for my children?

A: Yes, you can open a Junior ISA for your child (or your child can open it themselves if they are over 16), with a maximum investment limit of £4,080.

Q: Is there a fee to invest money in a stocks and shares ISA?

A: Although cash ISAs are usually free, stocks and shares ISAs often charge a small fee. But as the returns tend to be higher than for cash ISAs, the gains will likely offset the fees. And remember, any gains are free from tax.

Q: Do I need to pay tax on stocks and shares ISAs?

A: You don't pay tax on any income or capital gains you've made on your investments in an ISA, making them very attractive.

Q: Can I take money out of my ISA?

A: You can withdraw money at any time, subject to liquidity of the investments you hold in your ISA. You can not exceed the maximum contribution level each year, so if you have already contributed the maximum and make a withdrawal, you won't be able to 'top-up' that tax year.

Q: How long should I hold my ISA?

A:There's no right or wrong or minimum or maximum length of time to invest. Stocks and shares investments should normally only be made if you have a medium or longer term goal to achieve because short term ups and downs can be large. A financial adviser can help you make the right decision for your situation.

Q: Haven't the ISA rules changed recently?

From April 2017, any adult under 40 will be able to open a new 'Lifetime ISA'. Up to £4,000 can be saved each year and savers will receive a 25% bonus from the government on this money.

Money put into this account can be saved until you are over 60 and used as retirement income, or you can withdraw it to help buy your first home.

The total amount you can save each year into all ISAs will also be increased from £15,240 to £20,000 from April 2017.

You can read more about ISAs at www.gov.uk/individual-savings-accounts

Q: Ok, ISAs sound like the right option for me, how do I get started?

A: ISAs are a great tax-efficient way to invest and are easy to open. Give us a call to discuss your ISA options and financial plans.

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Talk to us about ISAs, pensions and other investment issues. Call 0333 241 9900 to speak to one of our helpful independent financial advisers now.