An Individual Savings Account (ISA) is like a locked bag holding different types of investments, and only you can open the bag. The taxman can't get his hands on it - any money you make within an ISA is tax-free.

This means you don't pay income tax on any income you make from your ISA and any increase in the original sum you invested (the capital) in your ISA is not subject to capital gains tax.

ISAs have taken over from personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) as one of the main ways for people to save money without paying tax.

Mini and Maxi ISAs
There are two types of ISA to choose from - the Mini and the Maxi ISA and there are three different types of investment that you can choose to invest in through your ISA. These are stocks and shares, life company investments and cash.

In any tax year (a year running from 6th April to 5th April) you can buy up to three different types of Mini ISAs or one Maxi ISA. You can't take out a Mini and a Maxi ISA in the same tax year. Depending if you choose a Mini or a Maxi ISA, there are limits to the amount you can put in. Here's what's allowed, and these limits are set until 2005/2006.

Mini ISA
You can take out up to three a year, but each one must be different type of investment, e.g. you can't have two stocks and shares Mini ISAs.

Mini ISA 1
Invest up to £3,000 in cash.

Mini ISA 2
Invest up to £3,000 in stocks and shares.

Mini ISA 3
Invest up to £1,000 in life company investments.

Maxi ISA
You can only take out one a year. You can invest in just one type of investment, or all three types up to set limits.

Maxi ISA
Up to £7,000 invested in stocks and shares, or

A mixture of stocks and shares, cash and life company investments. Investing up to £7,000 in total, of which:

• Up to £3,000 can be in cash.
• Up to £1,000 can be in life company investments.
• Up to £7,000 can be invested in stocks and shares.

One of the big differences between a Maxi and a Mini ISA, is whilst you can have up to 3 Mini ISAs a year, which can all be with different providers, you can only take out one Maxi ISA a year.

Want to find out more about ISAs then click on the links below:

• What are CAT standards?
• Who offers ISAs?
• What are TESSA and PEPs?

What are CAT standards?
The government introduced CAT standards for ISAs. 'CAT' stands for fair charges, easy access and decent terms. Not all managers of ISAs have decided to follow the CAT standards with their plans.

The CAT standards for different types of ISA are:

CAT standard cash ISAs

• There are no charges.
• You can put in or take out as little as £10 with no more than seven days' notice.
• The minimum interest rate you'll get will be no more than two per cent below base rate.

Life investment ISAs

• You can pay in as little as £25 a month, or £250 a year.
• The most you'll be charged to manage your investment will be three per cent of the value of your fund. There will be no other charges.
• When you cash in the ISA, there is no penalty, and if you've had the ISA for at least three years, you should get at least your initial investment back.

Stocks and shares ISAs

• You can pay in as little as £50 a month, or £500 as a lump sum.
• The management charge must be no more than 1% a year of the value of your fund. There will be no other charges.

Many ISAs do not meet the CAT standards but that doesn't necessarily mean they are poor value. For example a cash ISA with a £3,000 minimum investment will not be CAT marked, but could offer a very good rate of interest.

Who offers ISAs?
The government wants ISAs to be widely available, cheap and easy to buy, so you can buy them in lots of places like banks, building societies and supermarkets and from investment fund managers and even the post office.

The government wants ISAs to be widely available, cheap and easy to buy, so you can buy them in lots of places like banks, building societies and supermarkets and from investment fund managers and even the post office.

If you want to take out an ISA, there are a number of ways to do it:

• Contact the ISA provider directly, either through the internet, by calling them, or responding to adverts in papers.
• Speak to an Independent Financial Adviser. You'll find details of your local IFA in the Yellow pages (www.yell.co.uk), or visit www.unbiased.co.uk

What are TESSA and PEPs?
Tax-exempt special savings accounts (TESSAs) and personal equity plans (PEPs) were the tax-free savings schemes that you could invest in before the government brought in ISAs on 6th April, 1999.

TESSAs let you invest in bank and building society savings accounts, (the equivalent of a cash ISA) PEPs let you put your money into stocks and shares (the equivalent of a stocks and shares ISA).

If you have a PEP or TESSA that you bought before 6th April, 1999, you can keep the account, although you cannot put in any new money into existing ones.

What happens if you have a PEP?
Although you've not been able to put in any new money since 6th April 1999, any returns you get can be re-invested in the PEP. You can also transfer part, or all, of any PEP to another PEP manager. You can transfer it to a stock and shares ISA but you will lose your tax-free PEP allowance and will also use up your stocks and shares ISA allowance for that tax year.

What happens if you have a TESSA?
When it finishes its five-year term, you can transfer the capital - but not the interest - from your TESSA into a special 'TESSA-only' ISA to earn a competitive rate of interest.

Although you can transfer some of your TESSA money into a mini cash ISA or the cash component of a Maxi ISA you will also lose your TESSA-only ISA allowance for that tax year.

Remember that you can only invest £3,000 in cash in an ISA, but you could have up to £9,000 in a TESSA.