WHAT IS AN ISA?

To start, it's not actually an investment. It's a tax-free "wrapper" to put your investments in. Think of it as a bag of pick 'n' mix sweets - the Isa is the bag, you choose the investments that go in it.

What can I pick and mix then?

In terms of the amount, any sum up to �7,000. But then things can get a bit confusing. It depends if you go for a mini or a maxi.

Mini or maxi? Why would I want to buy a skirt?

See what I mean? A maxi Isa is where you invest your whole �7,000 with one company. Usually the total amount would be invested in shares, but it needn't be.

The provider may be able to allow you to put up to �3,000 into cash savings and �1,000 into insurance.

With a mini Isa, you split your money up before you invest it. You can have a mini for all three parts of your Isa, either with the same provider or three different ones.

The limits are �3,000 in cash, �3,000 in shares and �1,000 in insurance. But you don't have to buy three minis - you can just have the one or two if you want.

Can I have a mini and a maxi?

This is the really important thing - you can't mix minis and maxis.

The Inland Revenue won't allow it, so if you've already got a mini Isa for this tax year you can't take out a maxi.

What's the best cash Isa to choose?

It depends on what you're looking for. If you don't mind tying your money up for long periods of time, then consider a good fixed rate Isa.

If you think you might want to get at your cash in a hurry, you should look for one which offers instant access.

You should also keep your eyes peeled for the best interest rates. Remember that interest rates change and the best Isa today may not be the best Isa tomorrow.

If you want the flexibility of being able to transfer your Isa at a later stage, look for ones which have no transfer penalty.

Can I decide which shares go into my Isa?

Investors can either put a pooled investment like a unit trust in an Isa or pick their own favourite shares and put them in a self-select Isa.

Can I put my maturing Tessa into an Isa?

The short answer is yes. This is a great way of putting extra money in a tax-free shelter. Under normal circumstances you are only allowed to put �3,000 in a cash Isa, �3,000 in a shares Isa and �1,000 in an insurance Isa - or �7,000 in shares in one maxi Isa.

However the original capital investment from a maturing Tessa can be rolled over into a Tessa-only Isa (or Toisa) - that is in addition to the ordinary contribution limits.

How useful is the Cat mark?

Cat stands for charges, access and terms. If an Isa carries the Cat mark it shows that it has met certain criteria laid down by the government. It does not offer any guarantee that the Isa itself will perform well.

A Cat marked cash Isa may still not offer the best interest rate. Cat marks can therefore be useful but they are not the only guide to use when deciding who to trust with your money.

What is Bed and Isa?

In 2001/2002 each person can earn up to �7,500 a year in profit without being taxed. That is the capital gains allowance.

If the value of your share portfolio has increased by something near the CGT allowance, it may be worth considering how to "Bed and Isa" the shares.

You do this by selling a share and realising the profit you have made. You can then immediately buy back the share within an Isa. This protects any future gains you make from capital gains tax.

I think I understand now. So where do I get one?

Just about anywhere. Banks, building societies, fund managers and supermarkets all offer a range of products. You'll see plenty of adverts in the financial pages and many companies allow you to buy online. Just make sure you read the small print.

Is it cheaper to buy direct rather than through a broker?

Not necessarily. If you use an independent financial adviser (IFA) to select your Isa, the provider will reward them for putting your business their way.

You can expect to pay an initial charge of between 3% and 5% and about 1.5% annually after that. The IFA might get two-thirds of those charges as his or her fee.

But if you go direct to the provider, you might find yourself paying exactly the same price for the product.

That's because the big companies don't want to undercut the IFAs, as they need them to keep selling their Isas - not everyone is confident enough to buy without taking advice.

However, some brokers are getting wise to this. They don't give advice, but just take your order and pass it on. When they get their commission, they give a large chunk of it back to you.

A number of internet brokers are now using this discount strategy. If you want to cut out the middleman, then it's worth shopping around for good deals.

This guide was written by Adam Shaw, co-presenter of Cashing In and BBC Two's Working Lunch.