How early should you use your ISA allowance this tax year?

A Stocks and Shares ISA has become the core of many investors’ portfolio. It’s a simple way to invest for your long-term future, free of UK income and capital gains tax.

The new tax year started on 6 April. You can shelter up to £20,000 in your ISA before 5 April next year. This raises the same question every year – should you use your allowance early, wait until the end of the tax year, or spread it throughout the year?

This article isn’t personal advice. If you're not sure what’s right for your circumstances, ask for financial advice. All investments can fall as well as rise in value so you could get back lass than you invest. Tax rules can change, and the benefits depend on your personal circumstances. Past performance isn’t a guide to the future.

Do early ISAs trump last minute ISAs?

We’ve looked at the return from investing £5,000 each tax year in the UK stock market since Stocks and Shares ISAs launched in April 1999. One invests on the first working day of the tax year, the other on the last working day. The same £120,000 has been invested over that time for both.

There have been some difficult times for investors since ISAs launched. The dot-com crash, the Iraq War, the financial crisis and more recently, the global pandemic.

Whichever option you took, you’d have done very well. But you’d have been £9,587 better off overall by investing at the start of each tax year excluding charges. Paying in at the start of the year returned growth of 128% which is higher than when paying in at the end – 120% growth.

There are no guarantees this will continue though, and past performance isn’t a guide to the future.

On eight occasions, an investment at the start of the tax year would’ve fallen in value by the end of that same tax year. This shows it’s not a one-way street and it’s impossible to predict how the stock market will perform.

Investing on the first or last day of the tax year

Past performance isn’t a guide to future returns. Source: Lipper IM, 06/04/99 to 30/03/23. Includes 2022/23 subscriptions for both. Last subscription of 2022/23 tax year paid on 30 March.

FIND OUT MORE ABOUT THE HL STOCKS AND SHARES ISA

Spread your ISA over the course of the year

You can take advantage of your ISA allowance without doing it in one go. You can spread your investment over the year by investing on a monthly basis by direct debit.

This is great for people who want to invest, but don’t have lumps sums of cash available. You can start a direct debit with as little as £25 a month.

It’s also an option if you’re not sure whether now’s the best time to invest. Investing on a monthly basis gets rid of some of the emotional barriers to investing.

It also spreads the cost of your investment, helping to remove some of the risks if stock markets fall in value in the short term. Your regular investment could buy more of the same investment if the market falls, but the reverse is true if markets rise.

FIND OUT MORE ABOUT INVESTING BY DIRECT DEBIT

Editor's choice: our weekly email

Sign up to receive the week’s top investment stories from Hargreaves Lansdown

Please correct the following errors before you continue:

Existing client? Please log in to your account to automatically fill in the details below.

Title:

Please select... Mr Mrs Miss Ms Mx Dr Sir Rev

First name:

Last name:

Email address:

Main phone number: (optional)

Mobile phone number: (optional)

Date of birth: (optional)

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Title:

First name:

Last name:

Address:

Email address:

Where did you hear about us?

Please select... HL mention in the media Recommendation from a friend HL mention on another website Existing client Mobile application Advert on another website Advert in the press Search Engine / Research

Hargreaves Lansdown would like to contact you about the services we offer which may be of interest to you. We explain how we use your personal data in our Privacy Policy.

If you would rather not hear from us, please tick the relevant box(es) below:

Email - no thanks, please don't contact me via email

Post - no thanks, please don't contact me via post

Phone - no thanks, please don't contact me via phone

Register

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

Your postcode ends:

This is my postcode

Not your postcode? Enter your full address.

Hargreaves Lansdown PLC group companies will usually send you further information by post and/or email about our products and services. If you would prefer not to receive this, please do let us know. We will not sell or trade your personal data.