You can invest up to £20,000 a year in individual savings accounts (Isas), and up to £40,000 tax-free into pensions (subject to scaling down for the highest earners). But these tax wrappers work differently to each other, meaning that there are times and situations when one can work better than the other. In general, longer-term investors paying higher rates of income tax favour pensions because they can get tax relief of 40 or 45 per cent on their contributions. But Isas are subject to fewer rules on how and when you can withdraw money from them.
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