How to make the most of your ISA in the new tax year 2026/27
Written by Boring Money
1 April, 1970
The new tax year is here — and the best thing you can do is act now, not in April 2027. Whether you've got £50 or £20,000 to invest, three things determine how much wealth you build over time: when you start, how much you put in, and where you put it. Get those three levers right, and your ISA can do far more heavy lifting than most people realise.
The new tax year brings a raft of potential tax rises for investors. There are frozen income tax
allowances, plus higher rates on dividend and savings taxes. It makes it more important than ever to get your ISA working as hard as possible. These are our ideas to make sure you make the most of the allowances available.You have three levers available to you when building wealth over the long-term: time, contributions and investment strategy.
Why investing at the start of the tax year beats waiting until April 2027
Every year, investment platforms report a last-minute scramble as investors rush to use up their ISA allowance before the end of the tax year. While it’s better to use it than not — the allowance does not roll over — an even better policy would be to resolve to invest as early as possible in the tax year.
The principle is sound. Investing early means you get all the benefits of any capital growth or dividend income for longer. Over time, this extra growth compounds, along with the rest of your capital, leaving you with a bigger pot overall.
The maths supports this approach. According to Charles Stanley, over the past 10 years, someone who invested £6,000 in global shares at the start of every tax year would now be sitting on a pot of £103,758. Someone who left it to the last minute would have just £87,926. The middle option — investing monthly — would have left you with £97,629.
It’s worth noting that this won’t work every year. Charles Stanley says that there were four years out of ten when it would have been better to defer. These were years when markets were negative, such as 2019/20 and 2022/23. Nevertheless, the gains in the ‘winning’ years were far larger than the losses in the ‘losing’ years.
How much should you put in your ISA each year?
The ISA allowance may have remained unchanged for a number of years, but at £20,000, it is still generous. Importantly, it doesn’t roll over, so if you don’t use it every year, the opportunity is lost.
The numbers make this clear. Investing £5,000 a year from age 25 at a modest 5% annual return produces about £639,000 by age 65. Delay that start by ten years, and the outcome falls to roughly £354,000 — a shortfall of £285,000, despite investing only £50,000 less.
“The cost of delay is not linear; it compounds. Behaviourally, this is unsurprising. We tend to prioritise the present — what feels immediate, visible and certain — over outcomes that sit decades away. The result is not inaction by design, but by drift, and over time, that drift becomes expensive.
The best incentive may be the example of those investors that have diligently invested their full ISA allowance year after year. There are now over 5,000 ISA millionaires, according to HMRC, and pots of over £2m are becoming increasingly commonplace. The top 25 ISA investors are sitting on pots averaging an astonishing £11,305,000.
Data from the AIC shows that there are two investment trusts where regular £20,000 contributions since 1999 would have made investors over £3m — Allianz Technology Trust and Polar Capital Technology. Another six would have made investors £2 million: Scottish Mortgage, HgCapital Trust, Aberdeen Asia Focus, Pacific Horizon Investment Trust, CQS Natural Resources Growth & Income and BlackRock World Mining Trust.
What should you invest your ISA in for long-term growth?
As those ISA millionaires have shown, risk pays off over time. Markets are volatile and you may see weakness from year to year, but the overall direction of travel is clear. Locking in to the faster growth rate from stock markets makes a huge difference over time. £10,000 invested over 20 years at a growth rate of 3% gives you a pot of £18,207. Bump that up to 7%, and you’re looking at over £40,000.
The key is not to be too cautious if you’re investing for the long-term. Cash can feel intuitively safe, but may not protect you against inflation, and may not give you the growth you need to build wealth over time.
Joshi says: “Over the past century, UK equities have grown purchasing power by around 5.1% per year after inflation. Cash, by contrast, has delivered closer to 0.6%. More recently, since 2000, cash has produced a negative real return of approximately -1% per year once inflation is accounted for. Cash has a clear and valuable role — short-term savings, emergency reserves, liquidity. As a long-term wealth-building strategy, however, it’s often a costly default. The risk is not sudden loss, but the quieter erosion of purchasing power over time.”
You don’t have to go all-out in a high-risk technology fund if you’re not comfortable doing so. A well-diversified portfolio of global equities will do the job. Global equity income funds can be a good choice for those starting out. These funds will prioritise those companies that pay dividends, which can be a lower-risk approach to stock markets. It also means investors have the security of a regular dividend, which can help ease fears during volatile times in markets.
Start this tax year as you mean to go on. Use the three levers to their best effect and you’ll be in a better position every year.
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