As the end of tax year approaches, Fidelity International has put together some ISA myth busters to help investors make the most of their tax-free allowance.

1) ISAs are risky – FALSE:
An ISA is simply a tax wrapper that shields any returns from your savings from the taxman. Any risk comes from the investments you have chosen to hold within the ISA, not from the ISA itself. The key is to pick the type of investments with which you are comfortable and then ensure you invest in them through an ISA wrapper to make the most of the tax advantages the ISA offers. The ISA wrapper doesn't bring any more or any less risk to your investment, it merely shields the investments from the taxman; Try to separate the two issues and the ISA can become easier to understand.

2) ISAs aren’t really worth the effort - FALSE:
Whether your investments produce interest, dividends or just grow in value, if you invest or save outside an ISA the taxman will be looking to take part of any return you achieve. With an ISA, you are entitled to keep all that you receive from your investments and not pay any personal UK tax on it. Not bothering with an ISA simply means you’re happy to give some of your hard earned money to the Government when that is not necessary.

3) The tax advantages of an ISA aren’t worth it - FALSE:
Most people would say that keeping even a single pound in their pocket is better than putting it in the pocket of the taxman. That’s the point with an ISA - whether the tax break is worth a pound, hundreds of pounds or thousands of pounds it’s surely better to have any extra money than not have it and see it go in tax.

4) But the tax advantages are not truly worthwhile are they? - FALSE:
While does all depend on how much you are investing, what you are investing in and your own tax circumstances, the tax boost from an ISA can amount to hundreds or even thousands of pounds. Sometimes, people tend to look only at a single year’s contribution and only at the tax advantage they get from that in just one year. It might not look a great deal but if you then factor in all the other contributions you will make and all the tax benefits on each and every contribution compounded up over a period of time, the sum of all these little bits can start to become a great deal of money .

5) ISA’s are only for high rate tax payers - ABSOLUTELY FALSE:
It is true that a high rate taxpayer is likely to gain more from an ISA because they would have to pay higher rates of tax on their investment returns outside an ISA. However, basic rate taxpayers also have to pay tax on interest and capital growth outside an ISA, so the ISA provides tax advantages for all taxpayers.

6) I’m a basic rate taxpayer and I have a capital gains tax allowance, so I don’t really need an ISA - FALSE:
First, there are many types of ISA investment (cash, corporate bond funds etc) that produce interest. This is subject to income tax and the ISA saves that tax. Your capital gains tax allowance is irrelevant here. Secondly, it is true that as a basic rate taxpayer, if the total capital growth on your investments doesn’t exceed your CGT allowance then the ISA provides no additional tax boost. However, always use the ISA first because nomatter how much the investment grows by there will be no tax to pay, whereas there might if you exceed the CGT allowance. If you have lots of money use both allowances if you can and place the relevant investments accordingly.

7) At this moment, I don’t know where I want to invest so I’ll have to miss this year’s ISA – FALSE:
For those investors who want to take advantage of their ISA allowance but are unsure where to invest, there is an option in the shape of Fidelity’s ISA Cash Park. Investors can simply ‘park’ the money and decide later where to invest. That way, you can make sure you use your ISA allowance without being forced into an immediate decision of where and when to actively invest the money. Otherwise, you are right that if you don't gt in before the end of the tax year on 5 April 2010 you will lose your ISA allowance.

8) If I’m saving tax on my ISA investments I will need to complete a tax return – FALSE:
Any tax savings happen automatically within the ISA and ISAs do not have to be recorded on your tax return. You do not even need to tell your HMRC office (the taxman) that you have an ISA.