A new start for a new tax year
It's the first day of the new financial year, and it's natural to feel the pressure is off.
Hopefully, you used up all your tax allowances before the 'use-it-or-lose-it' cut-off point at midnight. But next April will roll round before you know it, and there are good reasons for getting organised with your ISA now.
With the availability of online services, it's easy to leave things to the last minute - and many people do. According to investment firm Fidelity International, the most popular day for ISA investing in the last tax year was 30 March – just five days before the deadline.
But, says the firm, it's possible to earn a lot more by making regular, smaller contributions to your ISA throughout the year, especially if you opt for a stocks and shares ISA.
"If you had invested at the start of the tax year, you would have given your money an additional 12 months of tax-efficient growth," says the company's investment director for personal investing.
"The longer your investments are kept in the market, the greater the impact of compounding – that 'snowball' effect of building new investment returns on the investment returns you've already achieved."
Of course, many people can't find the money in one go at the beginning of the year. But, she says, "Starting early and splitting your payments throughout the year can lead to better returns overall than investing a lump-sum at the last minute."
According to Fidelity, if you had invested a lump sum of £1,200 in the FTSE All Share at the end of each tax year since 5th April 2007 you'd end up with a pot of £13,664.15 after 10 years.
If, however, you had regularly invested £100 in the FTSE All Share every month at the start of each tax year since 6th April 2006 for the past 10 years, you'd now have a pot of £15,198.30. That's a difference of £1,534.15.
And it doesn't stop there - the same principles apply to money you put into your pension. The maximum you're allowed to invest per year is currently £40,000, but it's possible to top up with any allowance you didn't use from the last three tax years - £40,000 last year, but £50,000 for the year until 5 April 2014.
