The end of the tax year – which falls on 5 April 2026 – is fast approaching. As the vital deadline draws near, you may already be thinking about the financial housekeeping tasks you usually complete.
This might include:
- Reviewing your pension contributions
- Checking whether you’ve made full use of your tax allowances.
Another task you might turn your attention to is using your Individual Savings Accounts (ISAs).
Each tax year, you can contribute a certain amount of your wealth across all of your ISA accounts, but if you don’t use it before the deadline, it’s typically gone for good.
As of 2025/26 and 2026/27, the ISA allowance stands at £20,000.
If you’re usually one to wait until the final weeks of the tax year to take action, you may find there are actually interesting advantages to thinking ahead and using your ISA allowance earlier rather than at the last minute.
Continue reading to discover why timing matters when it comes to using your ISA allowance.
Data has shown that investing in your ISA early delivers better returns over time
If you already have savings available, placing them into an ISA at the start of the year could give your wealth more time to grow in a tax-efficient way.
Indeed, once your funds are placed within an ISA, any interest, dividends, or growth are protected from Income Tax, Capital Gains Tax, and Dividend Tax.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change. The Financial Conduct Authority does not regulate tax planning.
Over time, this tax wrapper can make a significant difference to the value of your wealth, and the earlier your money enters it, the longer it has to benefit.
AJ Bell gives a practical example of how this works.
Imagine you invested £5,000 into a typical global fund (based on the total return of the IA Global sector average in GBP to 12 March 2025) every year since ISAs began in 1999.
If you invested on the first day of each tax year, you would now have £19,381 more than someone who had invested on the last day of every tax year.
Even though you would both have contributed £130,000 over this period:
- The last-minute investor would have £389,208
- The early investor would have £408,589.
While markets do rise and fall in the short term, they have historically risen more than they’ve fallen over the long term.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
As a result, money that is invested for longer has tended to benefit from greater growth, even if only for a year.
In fact, historically, the typical global fund has returned on average 7.7% from the start to the end of each tax year since 1999. It has also made a positive return in 17 of 26 tax years.
As such, you would have been better off investing at the start of the tax year around two-thirds of the time rather than waiting until the end.
Of course, investing your wealth always carries some level of risk, and returns are never guaranteed. Even so, history suggests that giving your money more time to grow in a tax-efficient wrapper has benefited investors in the past.
Drip-feeding savings throughout the year might be more effective than a lump sum at the end
Of course, it’s worth remembering that you might not always have a lump sum of £20,000 available at the start of the year.
If this is the case, spreading your ISA contributions across a year is a practical alternative.
Doing so allows you to steadily work towards your allowance throughout the year without putting pressure on your day-to-day finances.
For instance, if you contribute £1,666 each month, you can gradually reach the £20,000 limit, rather than facing a rushed decision as the end of the tax year approaches.
This approach might even remove some of the emotion from the process.
Indeed, markets naturally fluctuate over the course of a year, and investing regularly means you’ll be buying shares in a company at a range of prices. This could reduce the temptation to delay contributions in an attempt to time the market.
You could even set up a direct debit, as this could ensure your ISA allowance doesn’t slip your mind.
Our advice could help you determine if you can afford to maximise your ISA allowance early
When you’re managing your everyday spending, it’s easy for your long-term savings, such as using your ISA allowance, to fall by the wayside, even when you understand how important it is to maximise your ISA allowance early.
We could work with you to assess how much you can realistically set aside and whether it makes sense to save or invest within your ISA.
We can also put a structure in place for contributing a lump sum or spreading payments across the year.
Over time, regular reviews could mean ISA contributions become an afterthought, rather than something you only consider at the end of the tax year.
If you’d like to talk about the ways you can use your ISA allowance that fit around your financial situation, please contact us by email at info@investmentsense.co.uk or call 0115 933 8433.
Please note
This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
