How much Isa investors gain by paying at the start of tax year – not the end
Does the early bird get the (Isa) worm? New figures show how much investors gain if they put money in at the beginning of the tax year instead of at the end
- Figures show that investing on the first day of the tax year can earn you £9,271 more
- This is based on someone investing £3,000 each tax year since 1999
- We explain why you should consider investing in stocks and stocks Isa early
This week marks the start of the new tax year, meaning savers can make the most of a brand new £20,000 tax-free Isa allowance.
Enthusiastic savers and investors will have rushed to upgrade their Isa in the days leading up to the end of the past fiscal year to take advantage of the annual limit, but some are already looking ahead.
Putting money into Isa shares earlier in the year, rather than later, gives the investor more time to take advantage of potential growth – and new numbers have revealed just how much they could gain in the long run by taking an early bird. take approach.
Move Ahead: If you had invested £3,000 in the average global fund on the first day of the tax year rather than the last day of every year since 1999, you would have earned over £9,000 more
Stockbroker figures AJ call showing that an investor would be better off £9,271 investing £3,000 in an Isa in the average global equity fund on the first day of every tax year since 1999, rather than on the last day.
Early bird investors would have amassed a pot worth £200,373, compared to last minute investors who would have £191,102 in their Isa.
They would even benefit from this approach in a tough investment market, the study found.
Why is it better to invest in your Isa early?
By investing your Isa credit as soon as it becomes available on April 6 each year, your money is protected from tax from the start, explains Laith Khalaf, head of investment analysis at AJ Bell.
But it also means you have a bigger Isa pot because your money is on the market longer.
The early contribution is increased every year. So even if the early bird Isa investor has a bad first year, the market will recover over time and that early contribution will eventually break even and then make a profit.
Even in tough markets, early bird investors are better off than last minute investors.
AJ Bell’s research shows that during the global financial crisis, early bird investors were still ahead of last-minute investors, with a final Isa value of £94,443 compared to £88,044 in the last-minute investor’s Isa .
| Starting date | Total contributions | Early bird Isa value | Last minute Isa value | Difference |
|---|---|---|---|---|
| Tax year 1999/00 | £72,000 | £200,373 | £191,102 | £9,271 |
| Tax year 2008/09 | £45,000 | £94,443 | £88,044 | £6,399 |
| Source: AJ Bell, Morningstar, IA Global sector total return as of 3/22/2023, last contribution for last minute ISA investors assumed to be 3/22/2023 instead of 4/5/2023 | ||||
A survey conducted last week by CapitalRise found that only 34 per cent of adults in the UK knew you could invest £20,000 tax-free in an ISA each year.
Cash Isa’s are popular with savers, but with Isa stock, your money has the potential to be boosted by stock market returns.
Any investment growth or interest earned is tax-free and you have access to a range of products, including funds and mutual funds.
Myron Jobson, Senior Personal Finance Analyst at Interactive Investor, says, “Investing through Isa stock likely remains the best long-term option for Isa savers.”
While past performance is no indication of future results, stock market-based investments have a history of producing returns that exceed interest rates and inflation.
Due to the ups and downs nature of the stock market, investors are advised to hold their money in shares of Isa for the long term, at least five years, to weather times of market volatility.