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The ISA market has started to look a bit like this:

• In April: everyone scrambles for the top deals or, if they're busy, feels bad for not having enough scrambling time and then
• During the rest of the year: we kind of forget ISAs exist

But it doesn't have to be that way.

There are plenty of great ISA deals throughout the year and the tax-free high-interest means there's no time like the present to consider your options and contribute to emptying Mr Osbourne's pockets.

This is our full guide to cash ISAs: what they are, who can get them and how to get the top deals.

Individual Savings Accounts (ISAs) for beginners

In 1999 ISAs replaced Personal Equity Plans (PEPs) and Tax Exempt Special Savings Accounts (TESSAs) but their aim was the same: make saving more alluring. It worked.

ISAs can earn far more interest than other savings accounts because the tax man will never take a share of any money.

In other words, an ISA will increase the amount of interest basic rate taxpayers can earn from savings by around 25% a year and higher rate taxpayers will gain more like 66%.

The idea behind ISAs is to get you saving: you put aside a nest egg and then, at the beginning of the next tax year, you're allowed to add to it, tax-free, again.

The next year you can do the same again, and again, ad infinitum, slowly building up your tax-free nest egg.

ISA allowances

As you might expect, however, there are limits on the amount of savings that the Government will let you squirrel away.

The ISA limit for the 2012/13 tax year is: £11,280

However, savers can't put that whole amount, in cash, into one savings account. Only partial cash savings are permitted within that limit, the rest has to go in stocks and shares. So, in reality, you can put:

• up to £5,640 into a cash ISA and the rest of the limits into stocks and shares (or ignore stocks and shares altogether)
• or the full £11,280 in stocks and shares only

Since it's the most accessible form of ISA, this guide will focus on how to best use that £5,640 cash ISA balance.

All investments must be made by the end of the tax year, April 5th.

Any questions?

Can I access cash when it's in an ISA?

One of the most common misconceptions about ISAs is that once your money goes in, you can't touch it.

As long as you choose an easy access ISA, however, that's not true. In fact, you'll be able to withdraw money as often as you like and those withdrawals won't change the account's tax-free status.

However, the difference between an ISA and a normal easy access savings account is that once you put money in it's counted in your limit once, if you then withdraw it, you can't then put that same amount back in - that part of the allowance is lost for the year.

It's a bit of a complicated rule to explain but say, for example:

• You put £3,640 into your ISA
• Then you take £1,000 out so there's £2,640 left
• Now you can put in £3,000 to make up the full £5,640 limit right? Wrong.
• After the withdrawal you can only add £2,000 because of that initial £3,640 investment.

As complicated as it seems, though, the ISA system is still a lot more simple than many other savings accounts and far more rewarding so please don't be put off because you might want to make a withdrawal.

Compared to other accounts the penalty is small.

Is there a minimum age for ISA holders?

To have a cash ISA, customers must be 16. To hold a stocks and shares ISA they must be over 18.

Can I have more than one cash ISA?

You can only open one cash ISA with one provider during one tax year.

However, since you can open a new ISA every year you could end up holding several ISAs from several providers.

It's important to note, however, that an ISA provider isn't for life: even if you put an allowance away a few years ago you could still move it, still tax-free, to a better paying ISA if you want to.

Are ISAs safe?

Like all savings accounts, ISAs are protected under the Financial Services Compensation Scheme (FSCS).

The FSCS protects savings of up to £85,000 for every individual at each single institution, and so it could pose a problem if you're thinking of opening an ISA at a bank or building society where you already have a hefty chunk of savings.

See our full FSCS guide for more details if you think it could affect you.

What about stocks and shares ISAs?

Most people focus on cash ISAs first because stocks and shares is intended as a longer term investment and it's certainly a more complex one.

With Stocks and Shares ISAs account holders can't freely withdraw their savings and so the option is best suited to those who can afford to put their money away for at least five years.

In addition, since the stock market can fluctuate, there is no guarantee of any growth on the money you invest, unlike the Cash ISA, although those willing to take the risk could always see far greater returns than a cash ISA would ever offer.

All in all, though, you can see why we're focusing on cash first.

What about Junior ISAs?

Junior ISAs replaced the Child Trust Fund in November 2011.

They have a lower investment limit - £3,600 a year - and only two accounts per person are permitted but, otherwise, they're very similar to adult ISAs and the information on choosing and transferring accounts below will apply to them.

Choosing an account

As we've noted above, cash ISAs can pay some of the highest rates of interest of any savings account on the market.

But, unfortunately, it's not as simple as looking for the highest number sitting next to a percentage symbol.

Easy access vs fixed rates

Broadly, there are two kinds of cash ISA accounts: easy access and fixed rate.

• Easy access cash ISAs: the most common type of ISA offers easy access to the cash stored there with penalty-free withdrawals for users (although subject to the rules discussed above).
  
  However, these accounts don't tend to offer the top rates and their rates are variable, meaning that the rate you sign up for may change as the base rate changes, just like any other savings account.
• Fixed rate cash ISAs: those who like a more stable return on savings, and are willing to sacrifice the ability to make withdrawals without penalty, might want to consider a fixed rate account.
  
  Fixed rate ISAs give holders added security against any drops in the market: the rate you see is what you'll get.
  
  The drawback, however, is that account holders won't have regular access to their cash.
  
  Most institutions require a 1-5 year commitment on the investment and charge anywhere from 60-180 days in interest penalties for early withdrawals. As with any hard to access savings account, the longer consumers put their money away the higher the rate they can expect.

The difference in cash

The top easy access ISAs currently pay 3% in interest while the best fixed rate deals can pay up to around 5%.

Here's how that works out in actual cash over one year, assuming that you use the full £5,640 cash ISA limit from the very start and continue receiving the same rate throughout the whole period.

	3%	5%
One year	£169.20	£282
Two years	£343.48	£578.10
Three years	£522.98	£889

As you can see, those that can afford to lock away a portion of their money and be sure that they won't need to make a withdrawal can earn the most interest.

However, as we noted with the withdrawal rules above, not being able to get the top rate shouldn't mean shunning ISAs altogether.

As the table below shows, even at lower interest rates cash ISAs offer far better returns than their taxed equivalents.

Again, this table assumes the full £5,640 cash ISA allowance, with the rate remaining the same for a year.

	2%	3.5%	5%
ISA	£112.80	£197.40	£282
Basic tax rate	£90.24	£157.92	£225.60
Higher tax rate	£67.68	£118.44	£169.20

The transfer process

Once you've chosen your perfect ISA, there's the small matter of getting your cash in there.

You can either move cash from a current or other savings account to the newly opened ISA or, in the case of an ISA you already own, transfer the amount from one ISA to another.

The first option is pretty simple, you just follow your new financial provider's process for adding money to the account - always bearing in mind the limits and rules on withdrawals we talked about in the section above.

The second option is a little more complicated.

3 transfer rules

1. Use the transfer process don't just withdraw cash: if you have cash in an ISA and you take it out and put it in normal savings or a current account you'll immediately lose the tax benefits.
   
   If you're planning to reinvest an old ISA use the new provider's transfer process instead.
   
   That means looking for an ISA that says it accepts 'transfers in' in the small print and, 99% of the time, entering your old ISAs details during the application process.
2. Watch for penalties: some ISA providers charge fees for transferring out, especially during the first year or so. Make sure you check.
3. You can only split up old ISAs: if you only want to transfer some money from a cash ISA that's older than this tax year into a new account that's no problem.
   
   Be careful, however. New ISAs (i.e. from tax year 2012/13) can only be moved as a lump sum.