Careful planning is crucial at the end of the tax year because there are many important allowances and exemptions you may want to take advantage of.

For instance, you can contribute up to £20,000 to your ISAs each year and enjoy significant tax benefits. You won’t pay Income Tax, Dividend Tax, or Capital Gains Tax (CGT) on any interest or investment returns from wealth in an ISA, so you may want to use as much of your allowance as possible.

This often means that, as 5 April approaches, investors rush to contribute to their Stocks and Shares ISA after realising they haven’t taken full advantage of the tax wrapper throughout the year.

While last-minute contributions could mean you get more use out of your ISAs, it’s worth considering how this approach affects your long-term returns. Research suggests that being more prepared and investing at the start of the tax year could make a significant difference to the size of your portfolio.

Read on to learn more.

You could have missed out on £123,000 in the past 20 years by leaving investments until the end of the tax year

You may assume that it doesn’t make too much difference when you invest in your Stocks and Shares ISA, provided you contribute regularly. However, research published by MoneyWeek tells a different story.

If you had invested your full £20,000 in a Stocks and Shares ISA at the start of the tax year for the last 20 years, you would have contributed a total of £400,000. If those funds were invested in the MSCI Global Index, you would have built up £1.47 million in your ISA.

This is based on the historical performance of the index from 2005 to 2024, excluding fees.

However, if you had invested the same amount but waited until the end of the tax year, you would have £1.34 million after 20 years – a difference of £123,000.

Investing as early as possible could maximise the benefits of compound returns

Research into investing at the start v the end of the tax year demonstrates that the timing of your contributions is crucial. However, the reason for the difference in returns is incredibly simple – investing as early as possible gives your wealth more time to grow.

One of the key advantages of long-term investing is that you benefit from compound growth, which effectively means growth you see on returns from previous years.

For instance, say you invest your £20,000 ISA allowance in a Stocks and Shares ISA and achieve 5% growth in the first year. This is a return of £1,000, giving you a total pot of £21,000.

Now, imagine you generate the same 5% growth in the second year. As you see returns from the full £21,000, you now earn £1,050, even though the percentage growth remains the same.

As the years go by, this compound growth continues building, provided you don’t withdraw your returns.

When you invest at the beginning of the tax year, you give your wealth more time to achieve this compound growth.

Regular investments could mean you benefit from “pound cost averaging”

Another reason to invest regularly from the beginning of the tax year instead of waiting until the end is that you could manage the risk you adopt.

This is because of a concept called “pound cost averaging”, which describes how regular investments could smooth out natural market movements.

The value of investments fluctuates throughout the year, so your contributions to a Stocks and Shares ISA might buy you more shares in some months than others.

For instance, if you invested £1,000 in January and then there was a market dip immediately afterwards, the value of shares would drop. This means that your £1,000 would buy more units in February than it did the month before.

However, if the markets rallied and continued growing, your £1,000 contribution in March might buy less than it would have done in January.

Fortunately, as you are investing each month, you benefit from the lower prices and subsequent growth, while also paying more in some months. Consequently, the average cost of investing remains relatively balanced.

In comparison, if you were to wait until close to the end of the tax year and invest a large lump sum in March, you might purchase fewer shares overall. Additionally, a single investment immediately before a market dip could lead to significant losses.

It’s important to remember that markets are unpredictable and you always adopt some level of risk when investing. That said, starting early and making regular contributions could balance that risk when compared with investing a single lump sum at the end of the tax year.

Get in touch

As the tax year comes to an end, we can help you get a head start on planning for 2026/27.

Please contact us at hello@ardentuk.com or call or WhatsApp us on 01904 655 330. As an award-winning financial advice company with advisers included in the 2025 VouchedFor Top Rated guide, we can assure you that we’re a bona fide company providing excellent advice and high-quality service.

Please note

This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.