April investing could make ISA ‘early birds’ £83,000 richer than savings stragglers

Over time, being punctual made a big difference (Picture: Getty Images/Image Source)

If you always end up spending the last week of March scrambling to use up your annual ISA allowance, you could be missing out on a whole load of cash.

According to a new study, ‘early birds’ who get their savings in order at the beginning of the tax year accumulate more wealth than those who delay. And the lifetime total really adds up.

In a modelled scenario, InvestEngine researchers found that someone who maxed out a stocks and shares ISA (tracking global equities) every April since 1999 would now have a pot valued at around £1,277,963.

In comparison, the total for a last-minute investor who waited until each financial year was nearly over to deposit their cash came out at £1,195,127.

With a long-term difference of £82,836, the first saver ended up 6.93% richer than the other — despite the fact both made the exact same contributions.

There was still an advantage with smaller amounts too; investing £1,000 at the start of the each tax year during the same period yielded over £6,500 more than leaving it until the end.

Keep in mind, the value of your investments can go up or down (Picture: Getty Images)

In further research, Fidelity International also looked at how drip-feed approach to using up the annual allowance fared against both punctual and procrastinating portfolio-builders.

While getting in early again did best, generating a final sum worth £777,803 over 25 years, the regular monthly strategy netted £755,399, compared to the latecomer’s £735,646.

‘For many people, investing regularly can make the process feel more manageable,” said Marianna Hunt, personal finance expert at Fidelity International.

‘It helps reduce the pressure of trying to time the market and can take some of the emotion out of investment decisions. What matters most is making use of your ISA allowance and maintaining a long-term focus.’

It’s important to note that returns are never guaranteed with a stocks and shares ISA, and the value of your investment can go up as well as down depending on the market.

Still, giving your money as much time as possible to grow could potentially pay off — or at least help you avoid a pre-deadline rush.

What is a stocks and shares ISA?

An ISA is an account that legally allows you to avoid paying tax on your money, often known as a ‘wrapper’ because it wraps your money in a special type of tax-free status that means HMRC can’t touch the interest.

ISAs are sometimes known as ‘wrappers’ (Picture: Getty Images)

There are a few different types of ISA, but while you can have multiple of the same type, you can only pay into one of each type per tax year as part of your annual allowance – which is currently set at £20,000 – which renews every April 6.

‘Taking advantage of as much of the
allowance as you are able to makes sense,’ Alice Haine, personal finance expert at BestInvest previously told Metro. ‘No one wants to pay tax on money they have already been taxed on, which is why ISAs are a must-have financial accessory.’

Two of the most popular options are cash ISAs and stocks and shares ISAs, with the former offering savings and the latter investments.

There are a number of stocks and shares ISAs available, depending on whether you want to individual company shares, funds or bonds – all without paying income or capital gains tax on profits.

What that profit looks like (or if you make any at all) can vary though, and you may even get back less than you invest. Some stocks and shares ISAs also come with fees for management, trading or transfers, so it’s worth weighing up the risks and benefits based on your situation first.

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