Savers and investors are being urged to take advantage of higher limits for individual savings accounts (Isas), amid fears of rising taxes and as the new 50 per cent top rate of income tax takes effect.

Investors can now pay up to £10,200 into Isas each year, with up to £5,100 payable into a cash Isa.

But while savers are being advised to take out a cash Isa as soon as possible in the new tax year, experts say the outlook for stocks-and-shares Isa investors is less clear-cut.

Opening a cash Isa at the start of the tax year allows savers to gain up to 12 months of extra tax savings and to take advantage of current competition for inflows among banks and building societies.

The best cash Isa rates are more than 3 per cent – well above the base rate of 0.5 per cent. Savers prepared to tie up their money for five years can earn 5 per cent a year.

Santander and Alliance & Leicester are offering 3.2 per cent on their instant access Flexible Isa. Coventry Building Society has a one-year fixed-rate Isa paying 3.25 per cent for savers putting in the full £5,100. Kent Reliance Building Society has a similar one-year deal paying 3.2 per cent that is available for lower balances.

Meanwhile, Century Building Society, the tiny Edinburgh-based mutual, pays a market-leading 4 per cent on a two-year fix.

A 50 per cent taxpayer putting £5,100 into a best-buy Isa now, rather than waiting until next spring, could gain up to about £100 in extra tax savings. Justin Modray of advice website said that while this additional benefit was “not huge”, opting for an instant access Isa would allow savers to switch if a more competitive deal emerged later.

The risk with a fixed rate is that savers are locked in, should interest rates rise. However, a 4 per cent fixed rate over two years should still produce a higher overall return than from an instant access Isa, advisers suggested.

Adrian Lowcock, senior investment adviser at Bestinvest, said the timing of lump sum investments was key for returns in stocks-and-shares Isas. He warned that the UK stockmarket was looking “fully valued”, and said concerns about a double-dip recession or a hung parliament could lead to a correction. Even so, Barclays Stockbrokers, the biggest sharedealing firm, reports that one-third of its Isa holders say they plan to invest now.

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