Why start your ISA early?

It's the beginning of the tax year. Starting your ISA now, and using as much of your new £20,000 allowance as possible, could give you better returns in the long run.

Generally, the earlier in the tax year that you start your ISA, the better, as any investment returns you might make have longer to compound.

In fact, an ISA investor who used their ISA allowance at the start of every financial year since 2007 to invest in a fund tracking the FTSE All-Share Index could now be over £8,500 better off than someone who invested on the last day of the tax year. Of course, it's important to remember past performance is no guarantee of future returns and the value of investments can go down as well as up, so you may get back less than you invest.

You could be better off by investing in an ISA at the start of the tax year rather than at the end.

Source: Fidelity, April 2017.

This is a hypothetical illustration based on the performance of the FTSE All-Share Index between 6 April 2007 and 5 April 2017 and does not take into account the impact of any charges or fees.

It shows how investing a lump sum at the start of the tax year could yield the best results, with Investor A - the lump sum early bird investor - more than £8,500 better off than Investor C, the last minute, lump sum investor.

Of course, not everyone will have a lump sum to invest at the beginning of the tax year, but it’s worth noting that Investor B, the regular monthly saver was still markedly better off than Investor C who left it to the last minute.

Investing at the start of the tax year gives your money an additional 12 months of tax-efficient growth potential. You could also benefit from the impact of compounding – the ‘snowball’ effect of building new investment returns on any investment returns you’ve already achieved.

Whether you have a lump sum of up to £20,000 to invest now or wish to start a monthly savings plan, why not start your ISA today?

The value of tax savings and eligibility to invest in an ISA depend on personal circumstances. All tax rules may change in future. Please note, if you have paid into a Cash or Stocks and Shares ISA since 6 April 2017, you will not be able to open a further ISA of the same type before 6 April 2018. You may however make additional payments – up to the £20,000 ISA subscription limit - into your existing account(s). This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.

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