It's simple - Isas are more flexible

It's simple - Isas are more flexible

Savers and investors will able to stash more money in individual savings accounts (Isas) and gain more freedom about what they do with their cash under new rules coming in tomorrow.

The government says the shake-up is designed to make Isas "simpler and more flexible". So, the confusing system of "maxi" and "mini" accounts is being ditched in favour of cash Isas and stocks-and-shares Isas.

Launched in 1999 as a replacement for Peps and Tessas, Isas have proved a success. More than 17m adults have one and more than £220bn has been invested in them, according to the Treasury.

However, research from Nationwide claims Isas are "unfamiliar territory" for many savers, and that most people are unaware of the new regime - which means they may miss out on some of the benefits.

Here are the main changes:

You will be able to invest more in an Isa. From April 6, an individual will be able to put away up to £7,200 each tax year and receive all profits free of tax (the current annual limit is £7,000).

Up to £3,600 of an allowance can be saved in one cash Isa with one provider. The remainder of the £7,200 can be invested in one stocks-and- shares Isa - but that does not have to be with the same bank/building society/investment company.

For example, let's say John puts £1,200 into a cash Isa on Monday. Between then and April 5 next year, he could save up to another £6,000 in Isas......continued below

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This could be up to £2,400 in the same cash Isa, or up to £6,000 in a stocks-and-shares Isa with either the same, or another, provider or combination of both.

Or maybe John opts to set up a monthly direct debit for £500 into a stocks-and-shares Isa with a leading fund management group - over the year he pays in £6,000. In the same period he could save up to another £1,200 in Isas - either the same stocks-and- shares Isa, or a cash Isa with the same, or another company, or a combination.

You will be able to transfer some, or all, of the money you have stashed away in cash Isas during previous tax years into one or more stocks-and- shares Isas. This will not affect your annual Isa investment allowance. So, for example, Jane has £9,000 in cash Isas from previous tax years. She could, if she wishes, transfer some or all of this into any stocks-and-shares Isa(s) and still be able to take full advantage of her £7,200 current-year allowance.

You will also be able to transfer money put into a cash Isa during the current tax year into a stocks-and-shares Isa. If you do this, it must be the whole amount saved in that tax year up to the day of transfer.

Any money switched in this way is treated as if it had been invested directly into a stocks-and-shares Isa that tax year. The individual is still able to save up to the full remaining balance of their £7,200 allowance - including up to £3,600 in a cash Isa.

For example, Robert puts £3,600 into a cash Isa next week. He then decides to move the whole lot into a stocks-and-shares Isa. Robert can then still put up to another £3,600 into Isas - the same stocks and shares Isa, a cash Isa, or a combination of both.