ISA insights: guides, investment ideas and tax tips

Whether you’re seeking income or growth, ideas for your children, or you want to learn the secrets of ISA millionaires, this resource has everything you need to help you make the most of this ISA season.

5th April 2024 14:23

by Craig Rickman from interactive investor

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From 6 April, investors will be able to start making use of their allowances for the new tax year 2024-25.

As a reminder, you can invest up to £20,000 into an individual savings account (ISA) every year and shield any future gains and income from the taxman.

For those with young children, you can invest up to £9,000 a year into a Junior ISA (JISA) for each child under age 18. This is separate to your own allowance and can give your offspring a welcome financial leg-up once they reach adulthood.

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If you’re unsure what to invest in, it might be an idea to just stick to cash for now and make any decisions afterwards. The important thing is to get your money wrapped up in an ISA in time.

Naturally, with 365 days on your side you may be tempted to wait until later in the 2024-25 tax year to invest into your ISA. But research has shown there are serious benefits to getting out of the traps early.

A study conducted by interactive investor two years ago found that early bird investors – those who invest at the start of the tax year - who use the full allowance every year could amass an extra £33,000 in 20 years’ time. A significant sum to boost you closer to your financial goals, or perhaps even enable you to surpass them.

This is a core tactic of many ISA millionaires, who are more than twice as likely to invest at the start of the tax year. The premise here is simple: the sooner your money is exposed to the stock market, the more time it has to grow. What’s more, you could also catch more dividend payouts and further gain from the superpower that is compound returns.

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The one sticking point for many investors is that you need to have sufficient cash sitting in current or savings accounts to tuck away for five years or more. While some investors do use the full £20,000 every year, for others it’s out of reach. It’s worth noting that couples effectively get double the allowance.

However, you don’t need to commit the full £20,000 in one hit early in the tax year.

Investing what you have available (after keeping enough back for short-term financial commitments and emergencies) and drip-feeding money into your ISA every month, can be a prudent and balanced strategy.

The benefit of paying in regularly is that it mitigates some of the risk involved. The process of drip feeding, known in industry jargon as pound cost averaging, means you buy shares at different prices.

This can iron out the inevitable ups and downs that come with investing in stock and shares. It also means you won’t have to find as much to top your ISA up to the £20,000 max when 5 April rolls around again.

The drawback with regular investing compared to lump sums is that with less money in the market early, growth potential can be impaired. But of course, it all depends on how markets behave during that period. That’s risk and reward for you.

With a new tax year shortly upon us, it can also be a good time to consider both your current and future investment choices. With thousands of funds and shares to choose from, narrowing down what’s right for you, your personal risk appetite and specific financial goals can be a tricky and time-consuming task.

But we’ve got you covered here. While our experts’ articles and tips should never be construed as investment advice, they may help steer you towards suitable investments that will enable you to grow your wealth over time without giving you sleepless nights.

A hand-picked selection of articles can be found below. And, as always, don’t forget to diversify your ISA portfolio across a range of asset classes, regions and sectors.

Sam Benstead’s excellent piece on bond investing in ISAs

And where professional investors are putting money for Junior ISAs

These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

Please remember, investment value can go up or down and you could get back less than you invest. If you’re in any doubt about the suitability of a stocks & shares ISA, you should seek independent financial advice. The tax treatment of this product depends on your individual circumstances and may change in future. If you are uncertain about the tax treatment of the product you should contact HMRC or seek independent tax advice.

AIM stocks tend to be volatile high-risk/high-reward investments and are intended for people with an appropriate degree of equity trading knowledge and experience.

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