Early-bird ISA investors £34,000 better off over a decade

There are countless stories of savers and investors missing the end-of-tax-year deadline on 5 April, or rushing to use up their £20,000 ISA allowance with minutes to spare. But the cost of procrastination can amount to tens of thousands of pounds over the course of a decade.

Investment platform Hargreaves Lansdown crunched the numbers and found that the cost of leaving your ISA to the last minute comes to a whopping £34,313.

They based their calculations on an investor maximising their £20,000 allowance every year for the past decade, investing the money in a representative global stock market tracker – the Legal and General International Index.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

An early-bird investor who used up the allowance on the first day of each new tax year was left with £357,168 by the end of the period (total return).

Meanwhile, the last-minute investor who followed the exact same strategy, but waited until the last day of the tax year, made £322,855 – significantly less.

“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,” explains Sarah Coles, head of personal finance at Hargreaves Lansdown.

“The early investors aren’t sitting pretty every tax year, and at times of market falls, those who got in towards the end of the tax year will have dodged the drops earlier on. However, the fact that the early birds do so much better over time shows how these years are more than made up for by average stock market performance,” she adds.

Furthermore, getting ahead at the start of a new tax year means you can tick one job off the list and remove the risk of forgetting and missing the deadline. One eager client at investment platform Bestinvest maximised their full 2025/26 ISA allowance at just 11 minutes past midnight on Sunday, the first day of the new tax year.

Should you maximise your £20,000 ISA allowance now?

Of course, not everyone has a £20,000 lump sum to invest all in one go, but regularly drip feeding money into your ISA throughout the tax year could still prove a better strategy than leaving things until the last minute.

The longer your money is invested, the more time it has to benefit from the power of compound returns. Compounding happens when you earn “returns on returns”. Physicist Albert Einstein famously called it the eighth wonder of the world.

Of course, some investors will be nervous about the current market environment, with global stock markets having crashed in response to US president Donald Trump’s aggressive trade tariffs. However, market dips can sometimes create cheap buying opportunities that long-term investors can benefit from in the event of a market recovery.

Although timing the market is notoriously difficult, setting up a direct debit into a well-diversified stocks and shares ISA can help things average out over the long run.

“It is all too easy to have your investment decisions clouded by current market turmoil – events that will merely be blip for those investing for the long term,” said Alice Haine, personal finance analyst at Bestinvest.

“Regular investing is a great discipline that keeps you going through the ups and downs and helps reduce market timing risk as you’ll end up with ‘pound cost averaging’, where fewer units of investments are bought at times when the market is up and more when it is down.”

Getting ahead of potential ISA reform

Cash ISA savers may feel particularly motivated to get ahead early this year, after chancellor Rachel Reeves confirmed work is underway in the Treasury to reform cash ISA rules.

Reeves is reportedly looking at lowering the annual cash ISA limit to encourage savers to put their money into the stock market instead, where they can hopefully achieve better long-term returns while also boosting economic growth.

A stocks and shares ISA isn’t suitable for everyone at all times, though. Those with short-term savings goals, such as those saving for a house they plan to buy in the next couple of years, may not want to expose themselves to short-term volatility.

Investment markets almost always deliver superior returns to cash over the long term, but investors need to be willing to take a multi-year view. A minimum horizon of three to five years is typically recommended. Diversification is also incredibly important.

With the cash ISA limit at risk of being cut, potentially to £4,000 if the rumours are true, it could make sense to use up some of your annual allowance sooner rather than later. Just remember that you won’t be able to withdraw it without sacrificing that portion of your tax-free allowance, unless you opt for a flexible ISA.