Individual savings accounts (Isas) have been a prized tool for savvy savers for the past 26 years – and cash Isas are more valuable than ever.

Unlike other savings accounts, you won’t have to pay a penny of tax on the interest you earn on them.

Currently, you get a new £20,000 tax allowance each tax year, so you can use up this year’s allowance by April 5 and put in another £20,000 from April 6.

That’s £40,000 sitting in savings accounts where you get to keep all the interest and give none of it to the taxman.

Right now, when interest rates are better than they have been over the past few years, the Isa tax shelter comes into its own.

Changes since their inception have made these accounts even more valuable for cash savers. When they started in 1999, the cash Isa allowance stood at just £3,000. It is now nearly seven times higher at £20,000.

Back then, with rates around 6 per cent, you’d see around £180 tax-free interest if you put in the full allowance.

With a £20,000 allowance at 4 per cent widely available now, you can clock up £800 interest a year – tax-free.

You can open and hold as many cash Isas as you want with your current year’s allowance – until recently you were limited to just one.

It has also become much easier to switch your cash Isa to a new provider.

Your spouse or civil partner can now inherit an extra Isa allowance, too – equal to how much you have put into Isas – so as not to put a spoke in the wheels of your meticulous joint financial planning.

Go for an ordinary savings account and you could end up with a tax bill if you have more than £25,000 sitting in an account paying 4 per cent.

Basic-rate taxpayers have a personal savings allowance of £1,000, the amount of interest they can earn tax-free in an ordinary savings account.

Higher-rate payers get half this allowance, so would only need £12,500 in an account before being hit with a tax bill.

If you pay the additional 45 per cent tax, you get no allowance at all, so pay tax on every pound of interest you earn.

So the message this year is to put as much of your allowance as possible into an Isa – and do the same in future years.

Going forward, the allowance might not be as generous. There are fears that Chancellor Rachel Reeves is poised to return cash Isas to the dark ages with a new £4,000 limit in a cash Isa.

In 1999, when Isas first appeared, your full allowance was £7,000 a year – but the most you could put into the cash version was £3,000. You had to forego the rest of your allowance if you did not want to put any money into shares.

It’s only been in the past ten years that you could put the whole of your Isa allowance into a cash version of the account. 

But at the time, neither savers nor providers were keen on cash Isas. Rates were low and the personal savings allowance let the vast majority of savers bypass the tax net.

However, now rates are higher, the spotlight is firmly back on cash Isas, with savers piling in record amounts.

So it is important to use as much of your allowance as you can to build up a tax-free nest egg. Any part of your allowance that you don’t use in a tax year is lost – you can’t roll it over and add it to next year’s allowance.

Here are five rules to help.

> Check the best cash Isa rates in our independent tables 

1. Maximise your Isa allowance

Move every penny you can out of ordinary savings accounts into a cash Isa. It might not save you anything in tax now, but it will pay off in the future as your savings grow.

Is some of that £300 billion sitting in current accounts earning no interest yours? Move it (or at least some of it) to a flexible cash Isa. 

Here you will earn interest and still get your hands on your money within hours if you need to, by moving it seamlessly between your Isa and current account.

A flexible cash Isa is an easy-access account with a variable rate of interest. It lets you put money in and out without any repayments counting towards this year’s cash Isa allowance.

The key rule is that you must replace the money into the same Isa account from which you took it – and in the same tax year.

Not all easy-access Isas are flexible, it is up to the provider as to whether they offer this valuable extra. This information is often hidden in the terms and conditions, so check them thoroughly.

This flexibility is important for savers who use their full £20,000 cash Isa allowance each year.

Even if you don’t, you can still dip in and out without having to keep a close tally on the amount you have put in.

You can, for example, put in £10,000 during this tax year and then take out £3,000. If your Isa is flexible, your remaining allowance is £13,000 (£20,000 less £7,000 you have in your Isa after the withdrawal). 

If it is not, it’s £10,000 (£20,000 less than £10,000 you have already put in).

The same applies to the previous year’s Isas. 

When you replace money it will count towards this year’s allowance if your easy-access cash Isa is not flexible. Ford Money Flexible Isa, minimum £1, pays a decent 4.35 per cent. 

You need to open an account by March 27 to make sure any money going in counts towards this year’s allowance and not next.

If you are happy with a non-flexible Isa, Family Building Society Market Tracker, available online, through the post or its Epsom, Surrey, branch, consistently pays a competitive rate (4.37 per cent from April 1).

Coventry BS 6 Access Isa (Online) at 4.3 per cent is also a good flexible option, as long as you are happy to restrict your withdrawals to six a year.

I expect all three accounts to carry on paying a competitive rate rather than end up in a financial backwater.

2. Convert a fixed-rate bond into a fixed Isa

Switch your maturing fixed-rate bond into a fixed-rate Isa if you are happy to tie your money up again to use up your allowance.

Fixed-rate Isas pay slightly less than ordinary accounts but you will shelter a big chunk of savings from the taxman.

If the cash Isa allowance goes down to £4,000, it will take you five years to funnel £20,000 into an Isa rather than just one – and you will pay more tax on the way.

Fixed-rate cash Isa rates edged up at the end of last week with OakNorth now at 4.47 per cent, Shawbrook a whisker behind at 4.42 per cent, and Charter Savings Bank, Hodge Bank, Zopa and Close Brothers all at 4.4 per cent.

You can earn around the same (4.41 per cent) with Close Brothers (but with a high minimum of £10,000) or 4.33 per cent with Shawbrook Bank (minimum £1,000) if you are happy tying your money up for two years.

Unlike on fixed-rate bonds, government rules say providers must give you access to your money in a fixed-rate cash Isa during the term. It will cost you – often 90 days interest on a one-year Isa, so will reduce your return by a quarter.

It works out at around £11 per £1,000 withdrawn at rates of 4.4 per cent, but at least you know you can get your hands on your money if disaster strikes.

It’s worth opening the product just before your bond matures, to ensure it is up and running in time. 

Providers usually give you 14 or 21 days to put money into the account once you have opened it.

On Friday, Paragon launches a 15-month fixed-rate Isa at 4.4 per cent. The bank gives you a generous 28 days to put money in your account. 

If you open it now, you can use it to put in next year’s allowance by waiting until April 6 to put money in. If a better deal comes up, you can simply abandon it and move on.

3. Mix and match your accounts

Once you have built up your savings, you can mix and match easy-access and fixed-rate accounts.

Last year, new rules let you take out any number of cash Isas using your current year’s allowance – lifting the restriction of opening just one.

This means you can easily split your money between fixed-rates and easy-access to suit your plans. You can also split it between as many providers as you wish.

With interest rates expected to head south, grabbing fixed-rate Isas where the rate will stay the same, rather than being open to an easy-access rate fall, seems a good idea.

Not all providers let you open more than one cash Isa with them using this year’s allowance. It is up to them whether they offer this.

Those that do include Charter Savings Bank with its Mix and Match Isa, Zopa (Smart Isa), Paragon (Isa Wallet), Nationwide (Portfolio Cash Isa), Newcastle Building Society (CustomIsa), Aldermore (MaximIsa) and Skipton BS (Isa Options).

Hargreaves Lansdown’s savings platform offers the same flexibility, except the accounts offered are from external savings providers rather than its own.

You can also spread any Isas you have taken out in previous years however you like and between as many providers as you like.

4. Switch if your rate falls

Keep an eye on your rates and get ready to switch if they drop. You might have picked the top deal at the time of opening, but banks and building societies have a nasty habit of letting their rates slip and launching new accounts with better ones.

You can transfer your cash Isa to a different provider or even to a new account with your existing provider easily.

The golden rule is that you get your newly chosen provider to arrange the transfer for you. If you do it yourself, you can lose the tax wrapper on your money, so have to pay tax on your savings.

While you can earn 4.5 per cent in the top easy-access accounts, some pay far less. You can quadruple your interest by switching from dud accounts.

The big banks pay below 1.5 per cent on their easy-access Isas. The worst is from Santander, paying as little at 1 per cent, along with Halifax and Lloyds at 1.1 per cent.

It can take up to 15 days to arrange the transfer and your providers must keep you informed about any delays. Most transfers go through much more quickly without a hitch.

5. Note down the maturity date 

Make sure you don’t lose out when your fixed-rate comes to the end of its term.

Some providers dump you in an easy-access account with a very low rate – often between 1 per cent and 2 per cent if you don’t tell the provider what you want to do with your money before it hits the maturity date.

Others will roll you over into another fixed-rate term where the rate could be a lot less than you can earn elsewhere.

Even if you do decide to roll it over, don’t just accept what your current provider offers. 

The difference between the top and bottom rate varies. It’s not as wide as on easy-access accounts, but still large enough to make a sizeable dent in your annual interest.

Right now, on one-year fixed rates it’s 0.67 percentage points between OakNorth at 4.47 per cent and 3.8 per cent at Sainsbury’s Bank, or £134 tax-free interest on your full £20,000 allowance.

But remember: if you open a new account with another provider secure its rate before your existing agreement comes to the end of its term. Make sure you stipulate the exact date you want the transfer to take place.

If your money is moved even a couple of days before the maturity date, you will be stung for an early withdrawal charge.