Begin investing at the start of a new tax year

Why you should always begin investing at the start of a new tax year 

A new tax year is on the horizon and there are many benefits to opening an ISA at the start.

From earning a higher rate of interest to being able to save more money, investing early is a great way to make your money work harder and to maximise the returns you can get. 

ISA season isn’t what it once was, thanks in part to the dreadfully low interest rates on offer and the fact we all have a personal savings allowance now, making the tax-free status of an ISA slightly less appealing.

However, there are accounts on offer paying interest, and there’s always investment ISAs or IF-ISAs to consider, where you’re likely to get a higher return. It’s always better to try and find an account with the highest return possible – whether that’s an ISA or a savings account.

If you have used up your personal allowance, an ISA will still offer valuable tax benefits too.

You’ll also need to look at other aspects such as how you can withdraw money from the account and any risks associated with the investment.

Getting in early on the ISA action can mean you’re able to save and earn more interest. Here we look at some of the reasons why there’s no point delaying an ISA investment. 

You’ll have longer for your investments to grow

As soon as you start putting money into an ISA, be it a cash ISA, stocks and shares, Junior ISA, or IF-ISA, it’ll start earning interest. 

You get a £20,000 allowance with an ISA each tax year, to put money in without paying any tax, and this starts on April 6, with the new tax year. 

If it’s a Lifetime ISA (LISA) you can also benefit from a government top up. Therefore, it’s worthwhile putting your money into one as soon as you can, to start earning interest and to benefit from any extra top ups. 

You may get higher returns from your investments

Many providers offer accounts paying high, or higher than average, interest at the start of the new ISA season. This is to tempt in new customers, but it could be a good way to find a new home for your savings. 

While rates aren’t what they used to be, if it’s a cash ISA you’re looking at they have crept up slightly in the last few weeks. If you want to set your sights a bit higher, although returns aren’t guaranteed, you could get a target rate of 3.08% to 8.00% p.a. with the easyMoney IFISA.

Putting money away at the start of the tax year also means there’s longer for it to be invested. This means it has a higher chance of earning interest for you and this could make a big difference to your returns in the long run.

You can take advantage of compounding interest 

Compounding interest is a mathematical phenomenon which basically means that your investments will grow at a faster rate.

This is because you’ll earn interest not just on any new money you’re putting into an ISA, you’ll also be earning it on money already in it and any interest you’ve made (assuming you haven’t taken any money out of the account). 

This can have a significant impact on your savings, letting them grow at a faster rate. Therefore, it’s important to start saving early to maximise the amount you can earn on your money.

You won’t be caught out by a last-minute rush

It’s important to use your ISA allowance if you have money to put away so you can take advantage of the tax benefits. Another reason for investing early is so you’re not panicking at the last minute. 

Opening an ISA isn’t always instant, neither is depositing the money, so to avoid any stress of finding one at the end of the year to store your money, look early so it’s one less thing to worry about. It can sometimes take a few days, or weeks, depending on the account you’re opening or transferring money into.

So, to avoid this stress, and the risk of missing the window altogether, it’s worth finding and opening a new account early into the tax year.

You could put more money away

We never know what’s around the corner, from job losses to pandemics, and therefore starting early and putting regular amounts of money into a savings account is a good way to build up a savings pot. 

By doing this early into the year, you can usually put away more money to put towards whatever your savings goals are.

This is because if you put off saving and wait until the end of the year, you may find that money being put towards other things instead. Obviously if you need the money for other more urgent purposes you won’t have a choice, but if you do find yourself with money to put away, it’s usually always better to keep it in an ISA rather than your current account.

 
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All the facts and figures presented are accurate at the time of posting.
easyMoney is not a cash savings account. You may not get back the full amount you put in. Your capital is at risk if you invest. Peer-to-peer investments are eligible for an Innovative Finance ISA which is not a Cash ISA. They are not protected by the Financial Services Compensation Scheme (FSCS). Money invested through easyMoney is concentrated in property and could be affected by market conditions. For the same reason, instant access cannot be guaranteed. We do not offer investment or tax advice.
easyMoney is the trading name of E-money Capital Ltd, a company incorporated in England & Wales. Registered office is 5 Fleet Place, London, England, EC4M 7RD (Company No. 04861007). E-money Capital Ltd is authorised and regulated by the Financial Conduct Authority (FCA) #231680.