Changing Isa rules make them even more attractive to savers and investors

Video: The Independent’s personal finance editor finds out how savers and investors can make the most of the new rules affecting tax-free savings

Have you used your 2014-15 Isa allowance yet? There were major changes introduced to them last year which means they have become more flexible and attractive to savers and investors, as consumer finance expert Julie Hutchison of Standard Life explains.

“Individual savings accounts – Isas - are a tax-efficient way to save or invest,” she points out. “There is now around £470bn stashed away in Isas and they’re about to have their 16th birthday, so they’ve proved really popular in the UK as a simple, easy way to save for the future.”

It’s the tax advantages that make Isas popular. There are two main types of Isa: the cash Isa or the stocks and shares Isa, and they each perform a different type of role.

You pay no income tax on the interest gained on a cash Isa – which is really no more than a simple savings account – while there’s no capital gains tax to pay on any growth in a stocks and shares Isa.

“Isas got a huge makeover last year, the biggest change in their 16 year history,” Ms Hutchison continues. “They became much more flexible and got a big step up to allow you to stash up to £15,000 in the current tax year, and another £15,240 in the next tax year, which starts on 6 April.”

How have they become more flexible? “The government introduced a new ability to transfer between cash and stocks and shares Isas last year which was a huge change. It means you can now have a cash Isa which you later decide to transfer to a stocks and shares Isa and visa versa.

“It means you’re no long stuck with the Isa that you have. You’ve got the flexibility to move both ways.”

When should you consider the different types of Isas? Watch the video to find out Julie Hutchison’s advice as well as more detail on other changes to Isas, including the ability to pass on your tax-free Isa allowance to your spouse.