As we approach the end of the tax year, you will already be reviewing which clients have made the most of their ISA allowance for 2025/26 and taking action where needed. In this article, Quilter are looking ahead, and exploring how starting early in the new tax year can offer real value in helping your clients maximise their opportunities.
Maximising the amount of time invested over the long term could make a notable difference to client investments. It’s the same reason that platform features like the prefunding of tax relief, switches and investments are so important.
But is the same emphasis always given to using a client’s ISA allowance as soon as possible? Or do we sometimes overlook the obvious and leave it until the end of the tax year?
A generous ISA allowance
The ISA allowance remains at a generous £20,000, making the impact of investing early even more important. For clients who regularly utilise their ISA allowance, the potential uplift is a perfect way to emphasise the importance of investing at the beginning of each tax year, not the end.
Whilst reviewing client files to check 25/26’s ISA allowance utilisation, it is a great time to point out that one tax year ending means another is beginning!
And don’t forget, with a Flexi-ISA clients have even greater flexibility should they need to access some of their ISA to cover unforeseen short-term cash needs.
Consolidating multiple ISAs into one place can also bring some extra benefits. These include, lower base costs for larger sums under management, simplified reporting of values and transactions, and importantly following death, fewer companies for family to deal with when collecting and distributing wealth.
How to quantify the benefits of investing early
There are two key benefits to investing into an ISA at the beginning of the tax year compared with the end:
- A boost to the ISA value itself – benefitting from future tax efficient growth for years to come
- Allowing tax allowances to be utilised on non-ISA holdings more efficiently
Let’s look at these in a bit more detail:
Boosting ISA value
If we compare investing £20,000 a year for 6 tax years at the start of each tax year (6th April) with investing the same £20,000 at the end of each tax year (5th April). Both ISAs have £120,000 invested over the period and we’ve assumed 6% growth per annum:
*We have calculated from 6th April 2020 to 5th April 2026
Investing early is a clear winner, with £8,351 boost to the ISA value after 6 years.
Using allowances more efficiently
Currently, each individual receives several allowances they can offset against their investment returns.
If £20,000 is held outside an ISA, for example within a general investment account, until it is moved to an ISA at the end of the tax year, this wastes some or all of these allowances which could have been utilised on other investment holdings.
Using the same 6% return but breaking it down 3% dividend yield, 2% capital growth an 1% interest yield, the wastage is easy to see.
1 £1,000 personal savings allowance 2 £500 personal savings allowance
Tax treatment varies according to individual circumstances and is subject to change.
As we approach the end of the tax year, you will already be reviewing which clients have made the most of their ISA allowance for 2025/26 and taking action where needed.
Looking ahead, starting early in the new tax year can offer real value and help your clients maximise their opportunities.
It doesn’t just stop there though, similar benefits exist for saving for children/grandchildren. Utilising JISA allowances early in the tax year again helps to provide a nest egg for the next generation.
Visit Quilter’s tax year end webpage for more information, and to access some useful guides, perfect for paraplanners.
Main image: forward, richard-bell-PMQ4Qd9Fu4I-unsplash
