The end of the tax year is a great time to take stock of your investments, reevaluate your goals and make sure you’ve made the most of your ISA allowance.
For investors, the dawn of the new tax year means the £20,000 ISA allowance gets reset. This allowance, a tax-free wrapper for investing, is something that anyone with the means should consider taking full advantage of over the remainder of 2024/25 tax year.
In this article, we’ll take a look at the basics of what the allowance is, and how it works, the ways in which you can take advantage of it and whether or not timing makes much of a difference.
If you don’t have an existing InvestEngine account, you’ll have to open one to get started with an ISA.
Capital at risk. Ts&Cs apply.
How do ISAs work?
ISA stands for Individual Savings Account. The main difference between an ISA and any other savings account is that it’s placed within a ‘tax-wrapper’, which shields your returns—whether they come from interest, dividends, or capital gains—from tax.
The maximum ISA allowance for the 2025/26 tax year is £20,000. This means that each tax year, investors can contribute up to £20,000 into an ISA and pay no tax on the returns, including both income and capital gains. The limit was raised from just over £15,000 in 2017 to give investors more to play with each tax year.
Tax treatment is dependent on individual circumstances and may be subject to change.
There are 2 types of ISA available on InvestEngine:
- Cash ISAs
- Stocks and shares ISAs
The choice of stocks and shares ISA vs cash ISA comes down to your goals and appetite for risk.
As of 6 April 2024, you can pay into more than one of each kind in the same tax year. For example, you can open and invest in multiple stocks and shares ISAs in the same tax year, allowing for greater flexibility and experimentation with different platforms or providers without incurring tax penalties.
In the current tax year, you can put up to £20,000 in an ISA. This limit is set by the government and can change from one financial year to another.
For more information on how ISAs work, check out our ISA Guide for the 2025/26 tax year.
Use it or lose it
It’s important to keep in mind that if you don’t use your whole ISA allowance in any given tax year, you cannot carry it forward into the next year.
For example, if you invest £15,000 into a stocks and shares ISA and nothing into any other type of ISA, then the remaining £5,000 allowance is lost. Maximizing your ISA allowance each year can lead to substantial long-term benefits, especially when combined with the power of compounding returns.
This is why it’s always worth reviewing your investments before the end of the tax year, to ensure you’re making the most of your allowances.
How to make the most of your ISA allowance
If you’re planning on investing this tax year, then now’s the time to consider how best to use your £20,000 allowance.
Review what you’ve invested in.
A sensible starting point is to ensure your current investments are in line with your risk profile, or you run the risk of either investing in a portfolio which is too risky, or not risky enough.
A portfolio which is too risky may result in you selling your investments and locking in losses when the market falls, rather than staying invested for the long term. On the other hand, investing in a portfolio which is too low-risk means missing out on returns which could potentially have been made.
Determining your individual risk profile involves assessing factors like how long you’re investing for, how reliant you are on your investments, and your attitude towards risk.
If you’re willing and able to tolerate high amounts of risk in your portfolio, then your portfolio can consist mainly of equities. If not, then it should consist of lower-risk investments like bonds.
Consider your choice of platform.
It might be worth considering whether you’re happy with your current choice of investment platform.
Investors will value different things when it comes to what they look for in their platform – whether that be ease of use, customer service, cost, or range of investment options.
A portfolio review provides a chance to reassess whether you’re happy with your current provider, and investigate whether there are any more suitable alternatives available on the market. If you’re planning on investing this tax year, then now’s the time to consider how best to use your £20,000 allowance.
Which brings us to InvestEngine’s tax year-end bonus.
Between now and the end of May, if you transfer an existing ISA to InvestEngine, or open and fund an account with us, you could get a bonus of up to £4,000!
Capital at risk. Ts&Cs apply.
Some things to keep in mind:
- New customers: ISA top-ups and transfers qualify for the bonus
- Existing customers: ISA transfers qualify, but ISA top-ups do not
- We’ll aim to add the cash to your account between 16 June and 4 July, 2025
- You’ll have to remain invested for at least 12 months to keep your bonus.
Don’t try to time the market.
Given it’s impossible to predict when and where market crashes are going to occur, avoiding trying to time the market is a sensible strategy.
Either investing a lump sum immediately (which is often the mathematically optimal strategy), or drip-feeding cash into the market (which may prove to be the behaviorally easier strategy to execute, particularly with larger sums), both are excellent ways to give your portfolio the best chance of growing over time.
Avoiding market timing by investing early also means that you will be able to make full use of your ISA allowances.
Is now the right time to invest?
With all that being said, it’s natural for you to ask if now is the right time to be investing.
The best time to invest is, almost always, right now. Time in the market beats timing the market, as the old saying goes. A long term investment strategy ultimately aims to make your market timing irrelevant.
Important information
Capital at risk. The value of your portfolio with InvestEngine can go down as well as up and you may get back less than you invest. ETF costs also apply.
This communication is provided for general information only and should not be construed as advice. If in doubt you may wish to consult a professional adviser for guidance.
Tax treatment depends on personal circumstances and is subject to change, and past performance is not a reliable indicator of future returns.