The problem with answering this question is, that there is no ID3v2 version which is 100% recommended for all cases (that's why Mp3tag has these three options).
ID3v2.4 with UTF-8 is the ID3v2 version which I'd recommend and which I'd like to see supported by all applications and devices dealing with MP3. Unfortunately there are many applications which are not able to read (and write) ID3v2.4 tags although specs are available since late 2000.
ID3v2.3 with UTF-16 is the first step backwards to be compatible with non-ID3v2.4 aware applications and devices. Unfortunately there are still applications which are not able to read Unicode (UTF-16) why I've added the third option.
ID3v2.3 with ISO-8859-1 is the second step backwards to be compatible with non-Unicode aware applications.
So I recommend using ID3v2.4 and if I'd notice any compatibility issues with other programs, I'd ask their developers to add support for ID3v2.4. The good thing with Mp3tag is, that you can go back to ID3v2.3, if you run into unresolvable compatibility issues.