5 Reasons You Should Invest In An ISA At The Beginning Of The Tax Year
The 2024/25 UK tax year commenced on April 6th and will continue until April 5th, 11:59 pm. The ISA allowance remains unchanged at £20,000. However, this year introduces new rules, notably allowing investors to allocate funds across various or identical types of ISAs, provided they do not exceed the allowance limit.
We will now look into the 5 reasons to invest in an ISA early.
Why should you invest early?
There is no wrong answer as to why you cannot invest late into a tax year. In fact, one recommendation is you’ll save up more to invest, making you more money in the long run. But there is a reason why you may want to invest sooner rather than later – the eye-catching tax-free** returns.
With an early investment, your money “may give you more potential to generate investment growth on your wealth” according to Hartsfield Planning1. This means it could maximise its potential returns in the current tax year as opposed to waiting until the end of the following tax year if you invested late. This means your early investment returns could double in the two tax-year brackets as opposed to just one single return by investing late. In addition, by investing early, you can see how well the ISA is operating, giving you a clear picture of whether you want to keep investing in your chosen provider for the following year.
To some, the ISA season is not what it once was. This could partially be thanks to the dreadfully low-interest rates on offer. However, there are always investment ISAs to consider, especially IFISAs where you’re likely to get a higher return. If you’ve used up your personal savings allowance, ISAs still offer valuable tax benefits too.
You’ll have longer for your investments to grow
Hartsfield Planning also states “making some early contributions could still be beneficial”. This is because any investment you make will start to generate interest. This of course doesn’t take a Lifetime ISA into account – but one should note an investment through Stocks & Shares ISA can start with a loss.
This is a good way to maximise the potential returns. With an early investment, your money can start growing from day 1 rather than day 300, working your returns from the very beginning. For those who place money into the Lifetime ISA, you can only place up to £4000 in a single tax year. You’ll gain 25% of your savings from the government – the 25% depends on how much you add every year, not the total balance of your account.
Higher returns offer
Like your favourite high street bank or clothing store, ISA providers typically offer an incentive at the start of the new ISA season to attract new customers. This can be a good method to find a new home for your savings. Although rates have slightly increased recently, they still may be unappealing to many. You may want to set your eyes on a Lendwise IFISA, where you can earn up to 9% p.a.* by investing in postgraduate education.
Placing your money in there at the beginning also means it’s there for longer, therefore a higher chance of earning interest for you in the long run.
Take advantage of compound interest
The mathematical phenomenon which is compound interest means that your investment can grow at a larger and faster rate. Albert Einstein stated, “Compound interest is the eighth wonder of the world”, adding to a quote by Benjamin Franklin, “Money makes money. And the money that money makes, makes money.” As AJ Bell2 quotes, “In the long run, this increases the amount your original investment returns.” This means that if you keep the returns on your investment in the account, you’ll make more money. The more you repeat the cycle, the more money you can potentially make.
Avoid the last-minute traffic jam!
Another reason to invest early is to avoid last-minute panic. Opening an ISA is not always instant, and neither is depositing money. Sometimes it can take weeks to transfer the money, especially if you are transferring funds from your existing ISA into a new one. To avoid last-minute stress, it’s recommended to start earlier so it’s one less thing to worry about at the end. Just remember to note how much you invested so you don’t surpass the allowance limit.
Increase your emergency pot
We never know what’s around the corner. The last couple of years have shown us to expect the unexpected. Investing earlier and regularly into a savings account is an effective way to build up savings or an emergency pot.
By doing this early, you can put away more money into whatever your savings goal is. This is because if you put it off until the end of the year, you may find you need to place that money into other things instead. If you do find yourself with money to put away, it’s usually better to keep it in an ISA rather than having it sit in your current account.
Why are there 4 Compelling Reasons To Invest In A Lendwise IFISA? Support postgraduate education on the Lendwise platform. Help make a difference to students looking to study at top business schools such as London Business School, Judge Business School, Chicago Booth and many more. Help make a bright difference to ambitious postgraduate students. *Explore investment options today.
*Capital at risk. Don’t invest unless you’re prepared to lose money. This is a high-risk investment. You may not be able to access your money easily and are unlikely to be protected if something goes wrong. Take 2 minutes to learn more.
**The tax treatment of interest and reliefs on defaults may be subject to change and tax treatment will depend on your individual circumstances. Check our Lender terms and conditions.
This blog is not intended to be financial advice. If you have any queries, you should seek independent advice from a professional financial advisor before investing your money.
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- Hartsfield Planning. 2 proven ways starting your ISA saving early in the tax year helps maximise your wealth. https://www.hartsfield.co.uk/2-proven-ways-starting-your-isa-saving-early-in-the-tax-year-helps-maximise-your-wealth/ ↩︎
- AJ Bell. Is it better to invest early on? https://www.ajbell.co.uk/learn/investing-early ↩︎