Your ISA allowance: Make your move sooner for success

The deadline might seem far off, but using up your annual ISA allowance early in the tax year can help you to make the most of tax efficiencies, maximise returns, and give you that all-important peace of mind. Read on to find out why it could pay to act now rather than waiting until the end of the tax year.


  • Stocks & Shares ISAs are a tax-efficient way of saving for the long term (i.e. at least five to 10 years). This could also be potentially quite lucrative.
  • An individual’s ISA allowance (the set amount you can pay in without being taxed on the profits) is £20,000 for this tax year (2021/22).
  • Increase your chances of growing your ISA and shielding it from tax by putting money into it as early in the tax year as possible.
  • It can be stressful to wait until the end of the tax year to use up your ISA limit – but investing as much as possible now brings peace of mind.

The key facts

The profits earned by a Stocks & Shares ISA are tax-free, meaning it’s an efficient way of growing your money. And because investing is a long-term game, you have a better chance of getting a strong return over time if you’re able to put your money into an ISA early on in the tax year.

Each tax year, the government decides how much you can put in an ISA without paying tax on the profits (also known as your ‘ISA allowance’ or ‘ISA limit’). For this tax year (2021/22), for example, it’s £20,000 per person.

There are two main types of ISA: a Cash ISA and a Stocks & Shares ISA – and you can split your annual allowance across both.

Interest rates are currently so low that your money is in danger of losing its value in real terms, as it may not keep up with inflation if saved into a Cash ISA. On the other hand, if you have a Stocks & Shares ISA and are able to keep your money invested for at least five to 10 years, it stands to grow at a faster rate. Why? Well, stock markets have a habit of rising over time, and so keeping the money invested for longer periods helps to balance out the short-term ups and downs that often occur.

Why top up my ISA now?

Some people tend to wait until the end of the tax year (5 April) to use up as much of their ISA allowance as they can. But by paying in as much as you’re able to earlier on in the tax year, your money has a far better chance of earning as much as possible for you.

Firstly, this shields your investments from tax for a longer period of time, plus it also allows your money that extra time to take advantage of ‘compounding’ – this is when the money your ISA makes through growth and investment income is reinvested. In this way, that too has the chance to earn you yet more.

For instance, let’s say that you had invested your full ISA or PEP (the predecessor of the ISA) annual allowance each year since they were introduced – in 1987 – early in each tax year, it would have been worth £1,100,932 at the end of the 2020/21 tax year (assuming the investments had followed the performance of the FTSE All-Share Index).1

However, had you waited until the end of every tax year to invest your full allowance, it would only have been worth £1,025,023.1 That’s a difference of £75,909 – around 7% less than what it could have made.

Act now!

If you’re in a position to use up your full ISA allowance, it’s a no-brainer to do so now rather than waiting until later on in the tax year. If you’re self-employed or waiting for a bonus and are unsure about how much you’ll be able to afford to save this tax year, it’s still prudent to invest as much as you can as soon as possible – albeit a relatively small amount.

Tony Clark, Senior Propositions Manager at St. James’s Place Wealth Management, says:

“As long as you’re doing something, rather than leaving everything to the deadline – even if you don’t have all the funds immediately available to use your full annual allowance – it can make a big difference. Then you can simply top it up when you get towards the end of the tax year, but you’ll still have had the benefit of compounding over the course of the year.”

Further benefits

Clark is also a firm believer that paying early and often into your ISA can give you some essential peace of mind:

“It’s all about creating a regular habit that’s likely to make you feel good about yourself.”

What’s more, he goes on to explain, it means you can avoid the last-minute stressful rush and be less likely to discover a shortfall next March.

“Of course, some people might not be sure what their earnings are going to be for the year, or how much they’ll be able to afford to invest. In that case, it’s a good idea to have a regular review with a financial adviser. They’ll be able to advise on the best course of action for you. And, whatever your situation, it’s always a good way to help motivate you to form that habit of saving or investing on a regular basis.”

If you would like to discuss your current ISA or have any questions about setting one up, please contact your Wellesley financial adviser today on 01444 244551. After all, working together means that we can boost your long-term investments as well as your peace of mind.


1 Financial Express. Figures based on the performance of the FTSE All-Share Index and investment of the full general PEP and ISA allowances up to and including the 2020/21 tax year. Allowance for 2009/10 is based on that for investors aged under 50 at the end of the tax year. Values as at 05/04/2018. ‘Early investment’ is from the beginning of May at the start of the relevant tax year. ‘Late investment’ is the beginning of April at the end of the same tax year. Please note that you cannot invest directly in the FTSE All-Share Index.

London Stock Exchange Group plc and its group undertakings (collectively, the “LSE Group”). © LSE Group 2021. FTSE Russell is a trading name of certain of the LSE Group companies. “FTSE Russell®” is a trademark of the relevant LSE Group companies and is used by any other LSE Group company under license. All rights in the FTSE Russell indexes or data vest in the relevant LSE Group company which owns the index or the data. Neither LSE Group nor its licensors accept any liability for any errors or omissions in the indexes or data and no party may rely on any indexes or data contained in this communication. No further distribution of data from the LSE Group is permitted without the relevant LSE Group company’s express written consent. The LSE Group does not promote, sponsor or endorse the content of this communication.

The value of an ISA with St. James’s Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than you invested.

An investment in a Stocks and Shares ISA will not provide the same security of capital associated with a Cash ISA.

 The favourable tax treatment of ISAs may not be maintained in the future and is subject to changes in legislation.

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