The Individual Savings Account (Isa) was introduced by the Government as a successor to the popular Pep and Tessa plans in April, 1999.

It is a valuable tool for protecting your investments from the taxman and should be considered a priority for those seeking to save regularly or invest a lump sum.

An Isa is not an investment in its own right it is actually a 'wrapper' into which you can place your chosen fund or funds. It protects your investment from income tax and capital gains tax and can help boost returns significantly over the longer term.

All UK residents 18 or over (16 or over from April 6, 2001) can open an Isa. The current allowance is £7,000 per individual per tax year. So a couple could invest up to £28,000 over the next two months, half before April 6, the other half on or after April 6. It is important to note that an Isa allowance, if unused, may not be 'rolled over' to the next tax year so use it or lose it! There are two main types of Isa the maxi-Isa and the mini-Isa. Within your Isa you can invest in up to three separate components stock market investments (including funds such as unit trusts), cash (including deposits and money market funds such as cash unit trusts) and insurance.

In each tax year you can have either one maxi-Isa or up to three mini-Isas (one for each component). However, you cannot open a maxi-Isa and a mini-Isa in the same tax year.

A maxi-Isa allows you to invest in a combination of components with one account manager. You can invest your full £7,000 allowance in stocks and shares.

Alternatively, up to £3,000 can be invested in cash and £1,000 in life insurance, with the balance of up to £4,000 in stocks and shares. An investor may open up to three mini-Isas each tax year and each can be with a different provider. As with maxi-Isas, the overall investment limit is £7,000, of which up to £3,000 can be in a mini stocks and shares Isa, £3,000 in a mini cash Isa and £1,000 in a mini life insurance Isa.

In addition a Tessa-only Isa (or ToIsa) is available for investors who wish to shelter the original capital (up to £9,000) from a maturing Tessa.

The diversity of options means that an Isa is worthy of consideration for most investors, whether for long-term capital growth, taxfree income or a short-term holding account. The choice can be daunting for an inexperienced investor. Advice should therefore be sought from a qualified independent financial adviser who can seek out the right product for your individual needs.

Julie Pickford is a partner at Mazars Neville Russell, the UK firm of Mazars, an international accountancy and consultancy group. Registered to carry on audit work and authorised to carry on investment business by the Institute of Chartered Accountants in England and Wales.