_{Holly Thomas is Deputy Personal Finance Editor at the Daily Express and Sunday Express}

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Savers are being urged to use up their full stocks and shares ISA allowance before the new tax year kicks in and this year's opportunities are lost, writes Holly Thomas

This means taking some risk with your money in the stockmarket, in exchange for the potential for better returns than those saving in deposit accounts.

You have a total of £7,000 Isa allowance which can all be invested in the stockmarket through a stocks and shares ISA.

Alternatively, you can use up £4,000 into the equity ISA, and the remaining £3,000 in a safe cash ISA, where you can get up to 8.1 per cent interest, tax-free. But remember, on April 6 the allowance will expire.

An ISA is not an investment in itself, but a wrapper in which you can hold investment vehicles such as equity investment funds and corporate bonds. Unlike other investments outside the ISA wrapper, you will not pay any capital gains tax and you do not have to mention them on your tax self assessment form.

While the tax benefits alone are no reason to invest in a stocks and shares ISA, it offers greater potential returns, but this is not guaranteed. What kind of funds you choose to invest in will depend on your attitude to risk. An independent financial adviser can help select a portfolio to match your requirements. If you do not have an adviser, you can search for one in your area at www.unbiased.co.uk

If you are confident enough to choose the funds yourself, then consider using a fund supermarket where you can buy an ISA online from a huge selection of funds. Look at www.fundsnetwork.co.uk run by Fidelity, for example, for a good selection.

Both have extensive research and performance tools. You can pay by debit card and transact entirely online. Fund providers typically levy up-front charges of between 3 per cent - 5.5 per cent of the sum you're investing. Fund supermarkets charge considerably less. There is also an annual charge to pay, usually of 1.5 per cent, but by using a fund supermarket this can be reduced to 1 per cent.

There are also a number of discount brokers such as Chelsea Financial Services - www.chelseafs.co.uk. and BestInvest www.bestinvest.co.uk which offer low-cost funds, and suggested Isas that meet your risk profile.

If an equity ISA appeals to you, but you already have cash ISAs from previous years, there's good news for the future. The Government has said that from April next year, money held in a cash ISA can be transferred into a stocks and shares ISA to encourage savers to diversify their assets. However, equity ISAs cannot be converted to cash accounts.

* Holly Thomas is an award-winning financial journalist and Deputy Personal Finance Editor at the Daily Express and Sunday Express.

She regularly appears as a lively guest on TV and radio shows, discussing topics including the housing market, savings, borrowing and other consumer issues.

Holly's views represent her own opinions and are for general information only. Always seek independent financial advice.

This article was created: 6 March 2007.
This article was last edited: 6 June 2007.

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