Client
Portal

Early bird investors

Back to News & Views

Does the early bird get the ISA worm?

If you're an investor looking to maximise your Individual Savings Accounts (ISA) returns, it's worth considering investing your ISA allowance as soon as possible each year, as soon as it becomes available on 6 April. Not only will this help ensure that your money is protected from taxes right off the bat, but it also means that your investment has more time to grow in the market. This can result in a bigger ISA pot in the long run.

Of course, this strategy may not be right for everyone, and there are risks to investing in the market. It's important to carefully consider your investment goals, risk tolerance and overall financial situation before making any investment decisions. However, for many investors, investing their ISA allowance early on can be a smart move that pays off over time.

Highly efficient way to protect investments from tax

An Individual Savings Accounts (ISA) is a highly tax-efficient way for people to protect their investments from tax. In the 2022/23 tax year, everyone in the UK had an annual Capital Gains allowance of £12,300, which was reduced to £6,000 in the Autumn Statement on 17 November 2022. This will reduce further to £3,000 from April 2024.

However, when you invest into an ISA, you can enjoy tax-efficient returns and don't need to declare any interest from an ISA or any income or capital gains made from it when completing your annual tax return.

Make sure you use your full ISA allowance

The maximum amount that can be invested into an ISA in the 2023/24 tax year is £20,000. This allowance hasn't changed since April 2017 when it was increased from £15,240 and is higher than the £7,000 maximum allowance offered in 2008. However, any unused allowance will not carry over to the next tax year, meaning that it's essential to make sure you use your full ISA allowance during the current tax year if possible.

Investing early can certainly offer many benefits, including an extra year of tax-sheltered growth. However, it's important to be aware that investing outside of an ISA can come with tax risks. The halving of the dividend tax allowance this tax year means that you may end up paying tax on dividends earlier in the year if you hold investments outside of an ISA.

Take advantage of pound cost averaging

Starting an ISA early in the tax year provides many benefits when investing, particularly when it comes to setting up regular monthly payments into a Stocks & Shares ISA. By doing so, you can take advantage of pound cost averaging, which is a process of drip-feeding money into an investment over time in order to reduce the impact of market ups and downs.

The idea behind pound cost averaging is that when you invest a fixed sum every month, you'll buy more units when an investment's price falls, which can provide the potential for greater profits if they then rise.

Establishing a regular investment plan early on

Of course, the opposite can also be true – if prices rise, you'll buy less. However, over time, pound cost averaging can help to smooth out the ups and downs in an investment's value, reducing the risk of dramatic swings in your portfolio.

By establishing a regular investment plan early on, you'll also be able to take advantage of the full tax year for your investments, allowing you to spread your investments across the entire year. This can help to reduce the risk of investing all of your money at a time when the market may be overvalued.

Good news is that you can transfer your ISA

Transferring an existing ISA could also be a practical option if you're looking for a more competitive deal or want to consolidate your investments. The good news is that you can transfer your ISA at any point during the tax year, but it's essential to take note of some things before you do.

For instance, you need to transfer the whole ISA, so you cannot partially transfer your existing Stocks & Shares ISA for the current tax year. It's wise to check with your current provider if they impose fees for transferring out. Taking this step can help you avoid unnecessary costs and ensure that you get the most out of your investment.

Consistently max out your ISA allowance each year

The old adage holds true when it comes to investing: time in the market is more important than timing the market. This means that the longer your money is invested, the more time it has to grow and potentially compound over time.

Investing in an ISA can be a great way to grow your savings pot beyond the limits of a tax-efficient allowance. It's important to consistently max out your ISA allowance each year, if affordable, and enjoy generous investment returns. Even if you don't have a large lump sum to invest, you can still benefit from regular, small contributions from the beginning of the new tax year. So start saving and investing today and see how far you can go!

Ready to put your 2023/24 ISA allowance to work now?

If you're considering using your ISA allowance this year, don't wait until the last minute. Invest early and give yourself the best chance of maximising your returns. Whatever your investment goals, we’ll help you to grow your wealth in a way that’s right for you. So why wait? Let us help you make the most of your ISA allowance today. To find out more please contact us.

THIS ARTICLE DOES NOT CONSTITUTE TAX OR LEGAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH. TAX TREATMENT DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF EACH CLIENT AND MAY BE SUBJECT TO CHANGE IN THE FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.

THE VALUE OF YOUR INVESTMENTS (AND ANY INCOME FROM THEM) CAN GO DOWN AS WELL AS UP, SO YOU COULD GET BACK LESS THAN YOU INVESTED. PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.

Book your FREE, no obligation discussion today. Schedule Appointment

Sign Up to our mailing list - Receive regular news, tips and financial commentary from the Gemini Team.

Latest News

  • In an era where the lines between work and personal life are increasingly blurred, a new study sheds light on a concerning trend among UK employees. Despite advancements in workplace policies and a growing emphasis on mental health and wellbeing, a significant number of workers are still pushing themselves to work even when they are not in full health. [...]

  • A recent study suggests that a substantial proportion of Generation Z, born from 1996 to 2010, view property acquisition as their principal avenue to amass wealth for their retirement years [1]. This perspective is slightly more prevalent within this demographic than the reliance on pensions, with 33% of Gen Z individuals planning to utilise property as a retirement fund compared to 30% who favour pensions. [...]

  • Recent research has uncovered that a staggering 51% of adults in the UK have neither penned a Will nor are they in the process of doing so[1]. This statistic encompasses 13% of individuals affirmatively declaring no future plans to undertake this task. Alarmingly, a significant portion of the older demographic, with 30% of those aged 55 and above, also finds themselves without a Will, including 9% who have decisively chosen not to create one. The primary deterrent for many is the perception of insufficient assets or wealth, cited by 26% of respondents, indicating a widespread misconception about the necessity of a Will. [...]

  • A recent study reveals that a considerable proportion of UK adults, including a significant number nearing retirement, find themselves in a quandary regarding their State Pension entitlements and the commencement of their payments[1]. The research underscores that 31% of Generation X individuals (ages 42-57) are in two minds about their retirement timing, in stark contrast to 19% of Baby Boomers and the older cohort (58 years and above). Moreover, a notable 24% of UK adults confess to being unsure about their retirement timing, with 27% of women feeling less confident compared to 21% of men. [...]

  • In recent times, a significant portion of retirees, specifically 14% of those aged over 55, have found themselves re-entering the workforce, driven by the inadequacy of their pensions to meet rising living costs, according to new research[1]. This phenomenon, further compounded by an additional 4% contemplating a return to employment, highlights a growing trend among older generations striving to sustain their standard of living in retirement. Notably, this trend is more prevalent among men, with 16% returning to work compared to 12% of women. [...]

  • Inheritance Tax (IHT) represents a significant consideration for anyone looking to pass on assets to the next generation. As of the 2024/25 tax year, IHT incurs a 40% charge on the portion of an estate exceeding the nil rate band of £325,000, excluding transfers to a spouse or registered civil partner. [...]

  • Recent research has uncovered that a staggering 51% of adults in the UK have neither penned a Will nor are they in the process of doing so[1]. This statistic encompasses 13% of individuals affirmatively declaring no future plans to undertake this task. Alarmingly, a significant portion of the older demographic, with 30% of those aged 55 and above, also finds themselves without a Will, including 9% who have decisively chosen not to create one. The primary deterrent for many is the perception of insufficient assets or wealth, cited by 26% of respondents, indicating a widespread misconception about the necessity of a Will. [...]

  • UK retirees are encountering significantly smaller pension pots than they had anticipated, with a considerable number expressing regret over not having commenced their savings journey earlier in their careers. New research has identified a disturbing trend: the average pension pot amounts to merely £131,000[1]. This figure falls short by £119,000 for individuals who had envisioned amassing a nest egg of £250,000. Such a shortfall can drastically alter the retirement lifestyle of many pensioners. [...]

  • A recent study has spotlighted women and investing, offering critical insights that aim to empower women to take the reins of their financial destinies and forge paths toward a prosperous future. Notably, an impressive majority of women (68%) engage in investment activities at least once a month, with over two-fifths (42%) diligently monitoring their savings and investments via online platforms or apps at least once weekly[1]. [...]

  • Recent research reveals that a significant proportion of individuals over 50 years old anticipate relying on secure income sources, such as Defined Benefit (DB) pensions, for their retirement funding[1]. However, the State Pension emerges as the most pivotal component of retirement planning, with three-quarters (73%) of this demographic identifying it as their primary income source. This data underscores the State Pension's integral role in the financial security of retirees. [...]

  • Inheritance Tax (IHT) represents a significant consideration for anyone looking to pass on assets to the next generation. As of the 2024/25 tax year, IHT incurs a 40% charge on the portion of an estate exceeding the nil rate band of £325,000, excluding transfers to a spouse or registered civil partner. Additionally, introduction of the main residence allowance in 2017, offering an extra £175,000 relief when a primary residence is bequeathed to direct descendants or where an individual has moved into a care home, enables individual allowances to reach £500,000 before IHT applies cumulatively. [...]

  • Individual Savings Accounts (ISAs) offer a versatile and tax-efficient way to save for the future, whether for yourself, your children or grandchildren. Now that we have entered the new financial year, on 6 April 2024, significant changes to ISAs have been introduced. [...]

Gemini Wealth Management Ltd is Authorised and regulated by The Financial Conduct Authority Registered in England & Wales No. 5919877 Registered Office: Gemini House, 71 Park Road, Sutton Coldfield, West Midlands B73 6BT The Financial Conduct Authority does not regulate tax and trust advice, will writing and some forms of buy to let mortgages. The guidance and/or advice contained in this website is subject to regulatory regime and is therefore restricted to those based in the UK.

Website by Mellow Marsh Software
© Gemini Wealth Management Ltd
Important Documents | Cookie Policy