The start of the new tax year is here and with it comes a fresh Individual Savings Account allowance for savers to utilise – as well as an unnerving dose of market turmoil. Despite speculation this year about a possible review of ISA rules by the Government, the adult ISA allowance for the 2024-25 tax year remains unchanged at £20,000, along with the Junior ISA allowance – also unchanged at £9,000.
The Government confirmed in the Spring Statement that it will consider reforms to ISAs to achieve the right balance right “between cash and equities”. While speculation that this could result in a cap on the amount that can be saved into a Cash ISA is rife, remember, this is just conjecture at this stage. For now, the treatment of the ISA remains the same with Britons able to save up to £20,000 into an ISA account free of tax on income and capital gains.
With most personal tax allowances remaining frozen until at least 2028, millions more people are finding themselves drawn into higher tax bands as their income increases, which is why saving into an ISA is so important. It is no surprise then that many savers scrambled to max out their ISA allowances in the race to beat the deadline to shelter cash and investments from the taxman, with the Bestinvest phone lines kept very busy in the final days the tax year end on April 5.
While it is human nature to leave things until the last minute, Saturday’s end of the financial year may have had an extra sense of urgency about it as investors considered their options amid the market turmoil triggered by US President Donald Trump’s trade tariffs.
The last Bestinvest ISA account holder to contribute to an ISA in the 2024-25 tax year did so at 11.44pm, just 16 minutes before the deadline at midnight on Saturday, April 5. Meanwhile, the last new ISA account at Bestinvest of the 2024-25 tax year was opened at 11.25pm and the last person to max out their allowance in full completed the transaction at 10.13pm.
That sense of urgency did not dissipate after midnight either, with some investors keen to get ahead and take advantage of this financial year’s allowance. One Bestinvest customer maxed out their fresh £20,000 ISA allowance in full at 12.11am on April 6.
Alice Haine, Personal Finance Analyst at Bestinvest by Evelyn Partners, the online investment and coaching service: "Trump’s tariff bombshell aside, Saturday night was no different to any previous tax year ends, with many investors investing right up until the cut-off point.
“Making use of ISAs to shelter savings and investment from taxation is vital now that the UK tax burden is estimated to be at the highest level since the Second World War. The thresholds for paying the basic, higher and additional rates of tax remain frozen until at least 2028, dragging millions more taxpayers into higher rates of taxation as their income increases.
“While many may feel a sense of relief now that tax year end is over, saving into an ISA does not need to be left until the last minute. With the annual dividend allowance standing at just £500, the Capital Gains Tax exemption remaining at £3,000 and savings rates still on the higher side, taking advantage of the tax efficiency that comes with saving into an ISA remains important.
“Those who want to get ahead this tax year can open or top up their ISAs now. Not only does investing earlier in the tax year remove some of the pressure to make a hasty decision; it also ensures your hard-earned cash gets put to work for longer. After all, as the saying goes ‘the early bird catches the worm’ and in the case of an ISA there is a whole year of potential tax-fee returns to be had.
“Research conducted by Evelyn Partners, the parent company of Bestinvest, found that investing an annual ISA allowance of £20,000 at the start of each tax year can lead to a larger investment pot compared to waiting until the end of the tax year. That could have been the motivating factor for the Bestinvest client who opened a new ISA with us at 08.03am on Sunday morning.
“While the turmoil that has engulfed the markets since US President Donald Trump unleashed his worldwide tariffs last week may be concerning for investors, remember money can be added to an investment ISA and left in cash for now. Investors can then take their time to assess market conditions and choose the right investments aligned to their attitude to risk.
“Another option is to take the timing out of the process altogether by investing on a regular basis. Drip feeding your money into an ISA regularly, such as monthly, removes the emotion from investing: it is all too easy to have your investment decisions clouded by current market turmoil - events that will merely be blip for those investing for the long-term. Regular investing is a great discipline that keeps you going through the ups and down and helps reduce market timing risk as you’ll end up with ‘pound cost averaging’, where fewer units of investments are bought at times when the market is up and more when it is down.”
