Investing in an ISA at the start of the tax year nets huge rewards, finds Vanguard

Source: Trustnet

Investing a full ISA allowance at the start of the tax year rather than waiting until the deadline could leave investors some £44,000 better off, research from Vanguard has shown.

Putting cash into a stocks and shares ISA on 6 April, with additional full ISA allowances on the first day of every subsequent tax year, would net a saver £393,102 after 10 years, assuming an annual return of 5.5% – the long-run average gains from equities.

Waiting until 5 April the following year and investing a full allowance on the same day thereafter for a decade (with the same annual return) would leave investors with £349,234, some £44,000 lower. Over 25 years, this compounds further (£1.08m vs £1.02m).

James Norton, head of retirement & investments at Vanguard, said: “We see that many people rush to max out their ISA allowance at the end of a tax year, rather than at the beginning, missing out on almost a year of tax-efficient returns.

“While investing a £20,000 lump sum at the start of the year isn’t realistic for most people, the real takeaway is that time in the market really matters. The key is to make your money work for you as early as you can, in a way that fits your circumstances. Ultimately, doing something is almost always better than doing nothing – especially when the alternative is your cash being eroded by inflation.”

Fidelity Personal Investing announced today that its first customer to use their full £20,000 ISA allowance for the 2026/27 tax year did so within the first hour.

The firm also ran its own figures on investing at the start and end of the tax year, which showed a similar pattern to the Vanguard research.

Fidelity analysts also included someone investing a £20,000 allowance monthly across the year, with returns sitting between the ‘early Shirley’ and ‘last-minute Lara’.

Marianna Hunt, personal finance expert at Fidelity, said: “While some investors choose to invest their full allowance straight away, it’s important to remember you don’t need to make all your decisions at once.

“For many people, investing regularly can make the process feel more manageable. 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.”