Stocks and shares ISAs provide investors in the UK with a unique opportunity to minimise tax on investments. Every year, we have an ISA allowance to use and it looks like more are choosing to get the ball rolling as soon as possible. Let’s see what these early birds are up to.
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Why are some investing early into a stocks and shares ISA?
According to research from Hargreaves Lansdown, the number of people putting money into a stocks and shares ISA in the first month of the tax year is up by 37%!
Why the big increase? One reason for this could be the continuation of extremely low interest rates on offer from banks. People want to make sure the value of their wealth doesn’t depreciate due to inflation. So an investment account is one way to try and stop this from happening.
Recent data also shows that it can be beneficial to invest your full ISA allowance at the beginning of the tax year. This could be another reason why some are getting stuck in to their allowance early on.
Who is investing early in their stocks and shares ISA?
The research shows that it’s the older, and perhaps wiser, investors who are taking action.
Sarah Coles, personal finance analyst at Hargreaves Lansdown explains: “Middle-aged people are the first off the blocks when it comes to ISA investment. It’s not an age we associate with being ahead of the pack and setting the pace, but when it comes to ISAs, those aged 30-54 are the brightest of the early birds.
“Among HL clients, those aged 30-54 were the most likely to invest in an ISA within the first month of the current tax year. Almost half as many people in this age bracket invested in the first month as invested in the whole of the previous tax year.”
“They’re followed by those aged 55-64. This group is keen to take advantage of what are often key years for building investments. Often people in the early years of adulthood are focused on short-term savings needs, while once you get beyond 65, you’re into the withdrawal phase of life, where overall you tend to be running your assets down rather than building them up.”
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Is it better to invest in a stocks and shares ISA earlier?
Of course, there are never any guarantees when it comes to investing. But there is data to support the idea that the early bird catches the worm.
If you’re investing for the long term, it’s time in the market that can be the most important factor.
Sarah Coles puts it nicely: “The earlier you use your ISA allowance in the tax year, the better, because your investments have longer to grow, and are protected from tax straight away. Over the long term, this can have an impressive impact on returns.”
“Early bird investors who have a lump sum to invest at the outset gain up to a whole year of dividends and potential growth in the stock market ahead of those who leave it until the last minute.”
Where can I invest in a stocks and shares ISA?
Don’t fret if you’re yet to use your allowance, there’s still plenty of time! We’re really lucky in the UK to have the ISA system. Using these accounts can be your secret weapon to building wealth.
We’ve researched and reviewed some of the best stocks and shares ISA accounts available. This way you can check out some of the options available to you.
You should bear in mind that not all ISAs are the same. So it’s important to try and find a platform that suits your investing strategy and goals. Past performance doesn’t dictate future results. But utilising your ISA allowance each year can give you a great chance of being successful in the long run.
Tax treatment depends on the specific circumstances of the individual and may be subject to change in the future.
