Thousands of taxpayers made the last-minute decision to take advantage of their unused annual ISA allowance on the eve of the 2018/19 tax year.

Many of those who beat the deadline in 2017/18 may have been driven by the opportunity to pass on up to £20,000 a year as their funds are safely concealed inside any combination of ISAs.

Recent figures suggest the tide may be turning as ISAs show signs of regaining popularity after years of subdued interest rates and changes to tax rules prompted subscriptions to dip by around 27%.

HMRC figures showed around 11 million ISAs were subscribed to in 2016/17, compared to just over 15 million in 2010/11.

Stocks and shares ISAs saw a slight year-on-year increase in 2016/17, but following hints at future base rate rises from the Bank of England, it's possible that cash ISAs could start to recover soon.

But which kind of ISA offers you the best way to maximise your savings at the start of 2018/19?

Cash ISAs

After years of low rates, cash ISAs could be back on the rise. According to financial information researcher Defaqto, rates in March 2018 were up 31% on the same time in 2017.

Cash ISAs function much like normal savings accounts, with the main difference being the £20,000 exemption from tax.

They are a fairly straightforward option, and can be opened through a number of banks, building societies and financial services companies by anyone over 16 and resident in the UK.

The money you save will stay in the account and gain some interest over time, without any risk of losing value.

The downside to this is that your savings may not rise in line with inflation, and with current low interest rates (currently 0.5% in April 2018), you might not see high returns any time soon.

You may be able to receive a higher rate of interest with a fixed-rate ISA, but these will restrict your access to the account for a set period.

Stocks and shares ISAs

If you'd prefer to invest your savings, a stocks and shares ISA could be a good place to start.

These accounts could include shares in companies, unit trusts and investment funds, corporate bonds and government bonds.

The minimum age requirement to open one is slightly higher than that of a cash ISA - at 18 - and one advantage of this type of ISA is its potential to keep up with inflation.

According to research by Royal London, the ‘purchasing power' of stocks and shares ISAs has grown by 47.9% since 2006/07, where it has fallen by 11.5% for cash ISAs.

On the other hand, returns are not guaranteed, and there is a chance that your investments could lose value. It's therefore wise to weigh up your appetite for risk before getting involved.

You'll need to put more time and research into selecting the best provider for a stocks and shares ISA and making sure the investments suit your requirements.

Can I use both?

You can put all of your savings in one type of ISA or split them across a combination of others - it's up to you.

However, the same £20,000 allowance will apply across all of your accounts, and you can only save into one of each kind of ISA each tax year.

Get in touch to discuss your personal finances.

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