How to make the most of your New Isa

1 Know the rules

From 1 July 2014, Isas will be simplified with the creation of the “New Isa” (NIsa), when all existing Isas will be rebranded as NIsas. The 2014-15 annual subscription limit will be increased from £11,880 to £15,000 and, in a significant change, all of the new limit may be invested in cash deposits, rather than the current 50 per cent. There will be more flexibility too. Currently transfers are only possible from cash Isas to stocks and shares Isas, but under Nisas it’ll be possible transfer investments from stocks and shares to cash as well.

2 Use the new rules wisely

The introduction of the ability to switch freely from shares to cash creates new opportunities for investors. For example, switching to cash could be an ideal way to lock in gains made on the stock market and reduce risk as retirement approaches. Alternatively, if you have built up cash Isas over the years this might be a good time to think about switching a proportion to stocks and shares, particularly while interest rates remain low.

3 What type of Isa is right for you?

While in recent years low interest rates from banks have encouraged investors to favour stock and share Isas over cash Isas, it is important to tailor your Isa choice to your specific needs. While equities will usually produce higher returns than cash in the long run, if you are saving for a short-term goal (such as a deposit on a house) or you just need a rainy day fund, then a cash Isa could be more appropriate.

4 Do your research

Shop around for cash Isas to find the best deal. It is important to think about your long-term plans – while some may offer an attractive headline rate, they can also tie you down for a fixed period of time. With interest rates likely to rise over the short to medium term, it is wise to look around for an Isa with rates and flexibility that suits you. Look out for introductory bonuses too, as the rate can fall dramatically after the first year. If you take advantage of these, make sure you switch away when the bonus element is removed.

• Sarah Mckinlay is partner and head of private clients at HBJ Gateley