With just over two weeks to go before the tax year comes to a close, Fidelity International reveals the most popular day for ISA investing in the last tax year was 4 April – just one day before the deadline. Once midnight chimes on 5 April, that year’s ISA allowance is gone forever.
In the previous year, investors chose to give themselves a little more breathing room to make the most of their annual ISA allowance, with 30 March being the favoured date for last minute investors to boost their ISA savings in the 2014/2015 tax year.
While the 2015/2016 tax year saw investors leaving it down to the wire, when it comes to your investments, it’s typically better to start as early as you can rather than leave it to the very last minute.
Maike Currie, investment director for personal investing at Fidelity International, comments: “It is human nature to leave things to the last minute and investors are no exception when making their final ISA investments.
“However, it really can pay to make the most of your ISA allowance early in the tax year rather than waiting until the very end. When investing, time really is a powerful factor. By starting at the beginning of the tax year, you give your money an additional 12 months to benefit from the magical power of compounding – that ‘snowball’ effect of building new investment returns on the investment returns you’ve already achieved.
“Of course, it can be difficult to stump up a lump sum at the start of the tax year to put into your ISA. Don’t let this put you off. A monthly savings plan is a simple way to start investing early and make regular contributions into your ISA. Starting early and splitting your payments throughout the year can lead to better returns than investing a lump-sum. This is because you will benefit from a process known as pound cost averaging – buying more units when prices are low and fewer when prices are high.”
Fidelity’s analysis shows that if you invested a lump sum of £1,200 in the FTSE All Share at the end of each tax year since 5 April 2003 you’d be left with a pot of £25,969.60 after 15 years.
If however, you had regularly invested £100 in the FTSE All Share every month at the start of each tax year since 6 April 2002 for the past 15 years, you’d now have a pot of £27,363.12. That’s a difference of £1,393.52.