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cash ISA makes a lot of sense for most people, especially those paying 40% tax, as long as you can get a good rate of interest, as there is no tax on interest. The reason to bother with an Equity ISA, is in time, you really could be hitting the CGT allowance, if you keep trickling money in over many years and don't dip into the fund. You also won't have to worry about declaring gains or dividends and of course, if you do pay 40%, it makes a huge difference, because an additional dividend tax would otherwise need to be paid. If you don't use your annual allowance, you will lose it and in general it is no more expensive to hold investments inside the ISA than outside. Investing in corporate or government bonds is still tax-free inside an ISA and also makes a lot of sense for everyone (they are generally safer than shares, but over the long term tend to pay out less)

You can invest in unit-trust, investment trusts or individual shares. Investment trusts are shares in investment companies and generally have lower charges and better performance than unit trusts, which are often recommended by advisors. Investment trusts do not pay commission to advisors, so they are unlikely to recommend them. There are hundreds of investment trusts and thousands of unit-trusts to choose from, ranging from UK larger companies or low-risk bonds to emerging markets and Japanese smaller companies, gold, mining and commodities. If buying unit-trusts for your ISA it is best to buy the ISA from a "fund supermarket" or discount broker, who will return most of their commission in the form of a discount. Individual shares are riskier and should be treated with care. It can also be expensive in charges to build up a diversified portfolio of individual shares.

If the organisation with which you have you Cash or Equity ISA goes bust, what happens to the money? Cash ISAs are covered under the 35,000 Financial Services Compensation Scheme (FSCS) and are treated just like an ordinary cash account. With an Equity ISA 50,000 is covered. 100% of the first 30,000 is covered then 90% of the next 20,000.
I certainly think ISAs are a good idea. Probably the best deal you can get for equities and definitely for bonds. Equity investment is risky, but no more risky in an ISA than outside. As for cash, NS and I index-link savings certificates at the moment give a possibly better return than a cash ISA, although this is more restrictive, but for most people Cash ISAs are an extremely good deal too.

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