Financial experts highlight that investors who are able to allocate funds at the beginning of the tax year, instead of waiting until the last moment, can often see a substantial increase in their long-term returns.
It’s a common trend for many individuals to delay their investments until the final weeks, or even up to the very last minutes, before the £20,000 annual Isa allowance resets at midnight on April 5th each year.
However, research indicates that those who invest early tend to outperform both those who invest regularly and those who procrastinate. Therefore, it’s advisable to reconsider your approach if you tend to delay but have the finances available at the start of the new tax year.
James Norton, head of retirement and investments at Vanguard, explains, “We observe that many individuals rush to maximize their Isa allowance at the end of the tax year rather than at the beginning, missing out on nearly a year of tax-efficient returns.”
He emphasizes, “The key is to make your money work for you as soon as possible, in a manner that aligns with your personal circumstances.”
Norton adds, “Ultimately, taking action is almost always more beneficial than doing nothing, especially when the alternative is allowing inflation to diminish your cash.”
Money experts explore how using different approaches to investment timing can affect returns over the long term, and offer some tips for the new tax year.
New tax year: The £20,000 annual Isa allowance resets at midnight on 5 April every year
Investing £5k a year
AJ Bell looked at how much someone would have made investing £5,000 a year since Isas were launched in 1999 – in monthly instalments, or at the start or end of the tax year.
It based performance on a typical global fund, by using the total return of the IA Global sector average up until 5 April 2026.
Someone taking this approach would have paid £135,000 into their Isa over the years, with the regular investor putting in £416.67 every month to match the others. So how much would they have made?
Early-Bird Erin: £462,028
Drip-Feed Diana: £455,027
Last-Minute Linda: £437,035
Difference between early bird and laggard: £24,993.
Investing your full Isa allowance
Fidelity analysed the same three timing strategies when investing in an Isa over 25 years
It used the total return of the FTSE All Share to measure performance.
And it assumed someone used their maximum Isa allowance each year – this was initially £7,000, but the limit was hiked many times over the years and has been £20,000 since 2017/2018.
Paying in the full amount possible would have cost you £306,560 over 25 years.
Early Shirley: £777,803
Monthly Monty: £755,399
Last-Minute Lara: £735,646
Difference between early bird and laggard: £42,157
Investing tips for a new tax year
Camilla Esmund, senior manager at Interactive Investor, offers guidance on making the most of your new Isa allowance.
1. Let time do the heavy lifting
Starting early in the tax year gives your investments longer to grow and benefit from compounding, where your returns start generating their own returns over time.
Even modest contributions made earlier in the year have more time to build than money added later on.
2. Don’t let market noise knock you off course
There will always be uncertainty, whether that’s economic news, market volatility or global events. It can feel more comfortable to wait until things ‘settle,’ but markets rarely move in a straight line.
Unfortunately, market ups and downs are part and parcel of investing, but understandably they are not easy to stomach.
History shows us that markets can and do bounce back over the long-term.
3. Use regular investing
For those who feel cautious about investing a lump sum, regular investing can be a reassuring alternative.
By drip-feeding money into the market, this can help smooth out volatility, so it can be effective way to manage risk and build confidence over time.
It also helps build discipline. Setting up a monthly direct debit into a diversified Stocks & Shares Isa can make investing feel more manageable and remove the temptation to delay decisions.
4. Make the most of your Isa
The new tax year brings a fresh tax-free allowance for a stocks and shares Isa, a valuable way to protect your investments from income tax, dividend tax, and capital gains tax.
You don’t need to use the full allowance straight away. You can build towards it gradually across the year, depending on what you can afford.
5. Stay savvy on fees
Keep an eye on fees. We can’t control the markets, but we can control how much we pay to invest.
If you know what you are paying in fees and you’re confident that those fees are not eating into your pot, which should be compounding over time, you’re going to be keeping more of your money.
DIY INVESTING PLATFORMS
AJ Bell
AJ Bell
Easy investing and ready-made portfolios
Hargreaves Lansdown
Hargreaves Lansdown
Free fund dealing and investment ideas
interactive investor
interactive investor
Flat-fee investing from £4.99 per month
Freetrade
Freetrade
Investing Isa now free on basic plan
Trading 212
Trading 212
Free share dealing and no account fee
Affiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence.
Compare the best investing account for you
