As we welcome the new 2025/26 tax year, now could be a great time for you and your clients to invest in an ISA (Individual Savings Account).
Your annual ISA allowance reset on 6 April 2025 and you can invest up to £20,000 in an ISA this tax year.
Yes, you have 12 more months to use your allowance, but if you want to grow your long-term wealth, data suggests that acting early could pay off.
ISAs are incredibly tax-efficient; you don’t pay Dividend Tax, Capital Gains Tax, or Income Tax on interest or investment returns you generate. Plus, there’s no tax to pay when you withdraw the funds.
While you may feel nervous about investing when the markets are volatile, as they have been in the days following the introduction of Trump’s tariffs, successful investors tend to focus on the long term, typically ignoring short-term fluctuations.
In fact, you may find you’re buying in when the markets are low. If so, you’ll end up buying more stock, meaning you could be well-placed to enjoy significant growth if markets bounce back in the future.
If we’ve piqued your interest, here are three more terrific reasons you and your client might want to invest in an ISA early in the tax year.
1. Investing early could increase the potential for investment growth
Investing in an ISA early every tax year allows your money more time to grow, which could significantly boost your long-term returns.
Data from Vanguard has revealed that investing the full £20,000 annual allowance at the start of each tax year for 25 years, could help you to grow your wealth by up to £56,000.
This hypothetical situation assumes annual returns of 5.5%. If you started investing £20,000 at the beginning of the 2025/26 tax year and continued to make a consistent £20,000 annual investment at the beginning of each tax year, you could amass £1,079,320.
On the other hand, if you invested the same sum, but waited until the end of each tax year, you’d accrue £1,023,052.
While the above example relates to a Stocks and Shares ISA, if you save into a Cash ISA, it could also prove beneficial to start early as you’ll generate interest over a longer period.
2. Your wealth has more time to benefit from the powerful effects of compounding
As demonstrated in the example above, one of the key reasons to invest early is that it allows your wealth more time to benefit from compounding.
Harnessing compound growth is one of the most powerful ways to increase your wealth – in basic terms, it’s growth on growth.
Over time, your money could snowball, and your pot could grow further.
Another great thing about compounding is that, once your money is invested, you don’t need to do much to benefit. If you’ve diversified your investments enough and your portfolio is aligned with your financial goals, time in the market can do a lot of the work for you.
3. You may be more likely to maximise your annual ISA allowance
ISAs are an excellent vehicle for tax-efficient saving and investing. The annual allowance for 2025/26 is £20,000. The allowance resets at the start of each tax year so if you don’t use it, you lose it.
As such, it’s sensible to try and use as much as your ISA allowance as possible every year. If you don’t start at the beginning of the 12-month period, you may struggle to maximise your allowance before time runs out on 5 April, the last day of the tax year.
If, on the other hand, you start contributing to your ISAs when the allowance resets on 6 April, you can spread your payments throughout the year.
Spreading your ISA investment throughout the year could help you to use more of your allowance than you may manage had you waited until the end of the tax year, which leads onto our final point…
Start a savings habit and invest in your ISA regularly throughout the tax year
As we have seen in recent weeks, stock markets can be volatile.
Regularly investing smaller amounts each month could help to reduce some of the emotional barriers that may give you pause.
By drip-feeding your money into a Stocks and Shares ISA, you’ll buy shares at a range of different prices.
When prices rise, your money will buy fewer shares. But, when prices drop, your money will go further and buy you more stock. This is called “pound-cost averaging”.
While there’s no guarantee of achieving better returns than you’d get from investing a lump sum, over the long term, regular investing will mean you end up paying the average price of the share.
This can help to reduce your risk and, potentially, provide you with smoother returns.
Ultimately, buying into the market at an average market price could help to reduce the effects of volatility. Should the market experience a rough period, regular investing may help cushion the impact.
Get in touch
Our door is always open to welcome new clients. If you’re interested in making the most of your ISA allowance or have clients who may benefit from sound financial advice from a team dedicated to building long-term relationships, please get in touch.
Email mail@delaunaywealth.com or call us on 0345 505 3500.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
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.
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.
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