Anytime after the middle of March each year it’s difficult to read the financial pages of a newspaper or browse a finance website without investment companies reminding us of the need to use our ISA allowances before 6 April.
Whilst obviously it makes sense to cut down on the tax you pay and to retain more of your investment returns it’s rarely pointed out by the very same investment companies that ‘ISA season’ can prove to be one of the worst times to use your allowance.
Firstly, human nature being what it is, it’s common to leave ‘boring’ and ‘mundane’ tasks to the very last minute. However, if you send your form directly to an investment company with a missing national insurance number or signature, this could result in your paperwork being returned to you. By the time you realise this, the deadline may have passed and you’ve missed out on using your valuable allowance. The net result is you may end up paying more tax than you needed to further down the line. (I should point some progressive companies are flexible enough to accept applications online and payment by debit card. Many still don’t so it’s important not to rely on them).
Also, by buying in late March/early April there are other potentially unforeseen costs. With many investors scurrying to beat the ISA deadline, a flood of new money comes into the investment markets on the same day. And with the surge in demand it’s common to see an increase in the price of investment fund ‘units’ so you end up buying fewer units than if you were purchasing at a different time in the tax year. In laymans’ terms, this is the financial equivalent of buying your airline ticket on the day of departure so you’re getting less ‘bang for your buck. Why would you knowingly do this?
Avoid the unnecessary costs and stresses by ensuring your Financial Planner takes care of all your tax allowances (not just ISAs) as part of their ongoing service. We prefer to use our Progress Meeting checklist to ensure client investment needs and all other issues are addressed with plenty of time to spare.
If you find your Adviser continually leaving your ISA arrangements until the last minute, you could always consider asking them how this eleventh hour approach really benefits you. And if you’re not satisfied with the answers you get you’ve got a decision to make. Life’s too short for spending time or money on things you find a chore, especially when there are many other trusted professionals out there only too willing to do the ‘heavy lifting’ for you.