Henry Irving 11 April 2019
The earlier you invest in ISAs in the tax year, the longer your investments can grow free of UK tax. And this can have a huge effect on performance.
History has shown that you’d have made thousands of pounds extra by investing at the start of the tax year, rather than at the end. Although past performance isn’t a guide to future returns.
We spoke to one ISA millionaire – a client of HL. He explained how he’s benefited from putting his money to work in the stock market at the earliest possibility opportunity in the tax year.
All investments fall as well as rise in value, so you could get back less than you invest. Tax rules change, and benefits depend on individual circumstances.
Mr C from North Yorkshire
Why do you invest through ISAs?
I invested in ISAs from the moment they originally launched (as PEPs). I was already an investor in the stock market before then having learned about investing at my grandfather’s knee and when ISAs came along, they were ideal for me. ISAs were initially designed to encourage more people to invest in the stock market but they also meant experienced investors could pay less tax on their investments.
I first opened an ISA for myself, my wife and my mother, and when my children were old enough, I opened ISAs for them too. In recent years, I’ve also opened Junior ISAs for my grandchildren so they can save tax on their investments in the future.
The main benefit for me is that ISA investments are sheltered from UK income tax and capital gains tax. This was particularly important when I first opened an ISA as tax rates were higher then than now, though the tax benefits of ISAs still apply today.
When do you contribute to your ISA?
I put in the maximum amount each year and as soon as possible after the tax year begins. There’s a lot of rushing around at the end of the tax year before the deadline closes but I try to do it at the beginning of each tax year. The earlier you can invest, the longer you have for your investments to grow.
Do you have any tips for ISA investors?
Be calm. If you are investing in shares, you should do it for the long-term and not worry too much about the short term noise. The greatest lesson I ever learned was when, as a young boy, I was reading the Financial Times with my grandfather and used to get excited that a stock had gone up. However, he used to say ‘that’s only one day and it’s how they do over the long term that matters’. That was good advice.
I am not a trader and generally try to select investments that I want to hold for five years or more. If share prices do fall, I look to add to my holdings instead of running towards the exit. I can’t promise that this strategy will work for other people but it has served me well.
This isn’t personal advice. If you’re not sure if an investment is right for you, please seek advice.
Make an early start with your 2019/20 ISA
If you’ve got the money to invest, you could reap the rewards of hitting the ground running this tax year. With HL, you can start this year’s ISA from as little as £100, or start a direct debit from £25 a month. Just make sure you’ve read the key features and terms and conditions first.