Ok, what is the best AMP and DAC for around £250, also how important is a DAC and would I be better just getting an AMP and saving the money?
http://www.amazon.co.uk/Epiphany-Acoustics-EHP-O2Di-Headphone-Amplifier/dp/B00O25MG88/ref=sr_1_3?ie=UTF8&qid=1418630860&sr=8-3&keywords=o2+amp
Another option, though some people aren't comfortable with ordering from China.
http://www.audio-gd.com/Pro/Headphoneamp/NFB1532/NFB15.32EN.htm
From layman to layman. A DAC is like a soundcard, providing dedicated components for audio processing. When of better quality then, for example, your motherboard you may get a noticeable improvement in sound quality. An AMP mainly is there to make things louder. However, it can also add its own flavor to the sound depending on the components its uses.
If you have a headphone which sounds quiet with your current gear, get an AMP. Otherwise, a DAC. I suppose mr.1920x1080 in the previous comment has you covered.
Thank you guys.
What is your source? What are you planning on driving? Do you need it to be portable? For £250, you can get quite a bit. Though, exactly what you should look at depends on what you are using them for/with.
Also, like was stated above, a DAC just converts digital audio to analog audio that can be played through speakers or headphones. Anything that is capable of outputting audio has a DAC, though some are better than others (environment matters as well). So the increase in sound quality or accuracy between a dedicated DAC and whatever DAC your source (motherboard, DAP, phone etc) has can vary quite a bit. Thus, how important it is really depends on how good your source's internal DAC is. Though, even the best built in DACs can usually be noticeably bested by a quality dedicated DAC.