Guide to maximising your ISA in 2025

Why delaying your investment could cost you

Many people delay contributing to their Individual Savings Account (ISA) until the end of the tax year on
5 April each year, but acting earlier could significantly improve your chances of reaching financial goals.

Whether you’re building a nest egg or saving for a specific aim, starting early with an ISA offers
some key advantages. In this guide, we explain why you should consider maximising this tax-efficient savings opportunity in 2025.

Investing in an ISA earlier in the tax year gives your money a vital head start. The longer your
investments stay in the account, the more they can benefit from tax-efficient compound growth.
This principle becomes especially powerful when you consider that compound returns build on each
other – each year’s growth forms the foundation for the following year’s potential gains.

Time amplifies investment returns

The mathematics of compound growth consistently benefits early investors. A £10,000 investment
earning 7% annually becomes £10,700 after one year. However, if that same investment grows
over five years, it reaches £14,026 – that’s £4,026 in growth instead of just £700. This acceleration
effect becomes even more evident over more extended periods, underscoring the value of every
month of early investment.

Over time, even small returns can accumulate significantly, generating substantial wealth. This is especially crucial during periods of inflation, when the value of cash in regular savings accounts tends
to decrease gradually.

Protection from escalating tax burdens

One of the compelling reasons to choose an ISA is its ability to protect your investmentsfrom rising taxes. If you hold investments outside an ISA, you may be subject to Capital Gains Tax (CGT) on profits above
your annual allowance. In the government’s 2024 Autumn Budget, CGT rates were increased for individuals selling assets, such as shares, with the lower rate rising from 10% to 18%. At the same time, the higher rate increased from 20% to 24%. This brought it into line with the CGT rates on residential property, which remained unchanged.

The annual CGT allowance was reduced from £12,300 to only £3,000 in April 2024, marking a 76%
decrease. This significant reduction means investors now have to pay tax on gains much earlier than
before. Previously, you could realise up to £12,300 in capital gains tax-free each year; now, any gains
exceeding £3,000 become taxable. An ISA guarantees that all growth your investments achieve remains
fully protected from CGT, no matter how much your portfolio increases.

Get in touch

For more detailed information, refer to our guide or contact our financial planners to find out how we can help you with ISAs, your other savings options, as well as your wider financial planning. We're here to help you plan for a secure financial future.

THIS ARTICLE DOES NOT CONSTITUTE TAX, LEGAL OR FINANCIAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH. TAX TREATMENT DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF EACH CLIENT AND MAY BE SUBJECT TO CHANGE IN THE FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE. THE VALUE OF YOUR INVESTMENTS CAN GO DOWN AS WELL AS UP, AND YOU MAY GET BACK LESS THAN YOU INVESTED. THE FINANCIAL CONDUCT AUTHORITY DOES NOT REGULATE ESTATE PLANNING, TAX ADVICE OR TRUSTS. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

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