Why You Should Contribute into your ISA at the Beginning of the Tax Year

27 June 2019

Like many things in life, contributing into your ISA is not always the top priority on your to-do list. Consequently, we often see clients investing money at the last minute in order to use up their ISA tax-free allowance, before it expires at the end of the tax year. 

However, investing your money at the start of the tax year allows your money to grow for an extra 12 months.  The sooner you use your allowance the more tax advantages there are to be had, such as sheltering the investment from capital gains and income tax.

As we all know, stock markets can be volatile, and your money can be at risk of stock market movements when you invest.  Often, the price of assets increases at the end of the tax year as everyone uses up their ISA allowance.  If you invest a regular sum of money each month, you can buy into funds at varying prices which can soften the effect of large price fluctuations. 

By investing money early on a longer-term basis your investment will receive the benefit of compound interest.  This means that if you invested your full ISA allowance of £20,000 every year, after 10 years your £200,000 investment would be worth £284,136, based on a five per cent total return each year.  

To help make regular payments you can setup a regular direct debit with most investment providers, this cuts out the administration and time needed for individual last-minute top-up investments.

Please do not hesitate to speak to one of our advisers if you are interested in placing a regular, or one-off investment, to top-up your ISA.  We can review the options available to you to help create your long-term investment plan.

Categories: investments, Tax