As April prepares to roll in, it’s a good time to start thinking about a Stocks and Shares ISA. Each year, British investors can put in up to £20,000 worth of cash or assets in an ISA – but any unsused allowance doesn’t roll over to the next year.
So using as much of it as possible ensures you get the most out of the tax benefits.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
With a new tax year approaching, now’s a good time to start thinking about which stocks to pick. But first, let’s see how much an ISA investor could have earned in the 2025-2026 tax year.
Super growth
The FTSE 100‘s typically delivered around 7%-10% a year over the long term, but since last April it’s up almost 30%. That means a full ISA allowance put into an index tracker would be worth around £26,000 now — £6,000 of profit, all tax‑free inside the ISA.
Investors who focused on big winners such as Fresnillo, Endeavour Mining or Airtel Africa would likely have beaten that, while more conservative choices might have lagged. But it’s fair to say that type of growth’s rare and there’s no guarantee it’ll happen again.
To prepare for years of slow growth, it pays to also hold some strong dividend-paying stocks like Legal & General, Standard Life or M&G (LSE: MNG).
A well-diversified portfolio could achieve a 7% average yield plus 3% capital growth — roughly a 10% total return. On £20,000, that’s still a decent £2,000 return, again sheltered from tax thanks to the ISA wrapper.
The best of both worlds
M&G’s a nice example of a stock that ticks both boxes. Over the past year, its share price is up about 21.8% and it has a dividend yield of 7.5% – equating to a near-30% total return. It’s both an asset manager and a life insurer, earning fees on hundreds of billions of pounds of client money while also running long‑term savings and retirement products.
Recent results showed adjusted operating profit of £838m and a very strong Solvency II coverage ratio of 242%. That gives it a healthy buffer against market wobbles. Plus, the total dividend was raised 2% to 20.5p per share, in line with its progressive dividend policy. That’s exactly the sort of steady income profile ISA investors often look for.
At the same time, management’s pushing a ‘capital‑light’ growth strategy. This means shifting more earnings towards fee‑based asset management. That could help take pressure off the balance sheet over time.
So is M&G the best stock to consider for an ISA this year?
Lots of options
M&G certainly looks good right now but still faces risks. A prolonged market downturn would likely hit assets under management and fee income. Plus, it faces execution risk as it simplifies the business and chases cost savings in a very competitive industry.
The dividend yield’s the core attraction, but it still depends on future profits and regulatory capital to avoid being cut or reduced. That’s why diversification’s so important – to avoid heavy losses in one area.
Whichever stocks you prefer, a Stocks and Shares ISA is considered a sensible way for UK investors to grow wealth over time. The twin benefits of tax‑free compounding and the freedom to manage your own portfolio make it an increasingly popular choice.
