Getting to the bottom and staying on top

Getting to the bottom and staying on top

Why pay tax on your savings and investments? Individuals can shelter as much as £7,000 a year from the taxman - but you have to do it before the end of the tax year. The deadline is April 5.

Guardian Money outlines the Isa rules, the different types of Isa, how to buy one, the boom in ethically invested Isas and whether you should buy, sell or hold the biggest Isa funds.

The first step for someone who can put aside only small sums is to deposit the money - a maximum of £3,000 a year - into a cash Isa. The best current option is National Savings & Investments. It is offering a no-notice cash "Direct Isa" paying 5.8% interest with a guarantee that it will stay 0.55% above the Bank of England base rate until at least April 5 2008. The drawback? The account has a minimum £1,000 deposit and has to be opened online or by phone at 0845 964 5000.

If you have less than £1,000, the next best option is Yorkshire Building Society's 5.75% account (call 0845 120 0100), available for deposits of £10 upwards. But there's a catch. The rate includes a 0.45% bonus which runs for one year after the account is opened. After that, savers should review their account and decide whether it's worth switching elsewhere.

But what if you fancy the risks and rewards of stocks and shares? You can place up to £7,000 into a tax-free shares Isa, although a lot of funds have a minimum £1,000.....continued below

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investment.

We asked four top financial advisers which Isa funds they would recommend to new investors.

Paul Illot at Bates (0113 3911 500) likes Gartmore Multimanager Balanced, which invests in a mix of shares, bonds and property. Jupiter Merlin Growth is his more risky preference.

Ben Yearsley at Hargreaves Lansdown (0845 345 0800) recommends Invesco Perpetual Income fund, run by Neil Woodford. "This fund invests mainly in UK companies that are profitable, dividend paying and cash generative, and you are investing with probably the best manager of his generation."

At Bestinvest (020 7189 9999), Justin Modray likes a tracker fund, Fidelity Moneybuilder UK Index. He says two-thirds of "active" funds underperform over three-year periods.

Darius McDermott at Chelsea Financial Services (020 7384 7300) likes UK funds with the possibility of a little overseas exposure. He names Schroder UK Alpha Plus, M&G Recovery, and Artemis European as best for first-timers.

See the world and safeguard the future

Matthew Bell, 30, is a geography teacher in Stoke on Trent but has finances in such good shape he could be teaching economics.

He made money out of the dotcom boom, taking profits before the bubble burst. He switched to cash Isas during the stock market downturn and fixed his mortgage at the low rate of 4.89% for 10 years, shielding him from recent increases. Over the past year he has ventured back into shares, buying a mix of M&G funds which reflect his love of travel and his faith in the economic future of China and India. Shanghai, is at the forefront of the Chinese industrial revolution.