Early-bird Isas: invest now to secure higher returns

The long Easter bank holiday is over and so is the 2014-15 tax year. That means that if you didn't invest in an Isa before midnight on Sunday you missed out on putting £15,000 beyond the taxman's reach.

About 40 per cent of Isa investors get their money into an acount a few weeks before the deadline. So, now it's a new tax year and you probably aren't planning to think about Isas again until after Christmas. But you should.

"It is human nature to leave things until the last minute," says Jason Hollands, managing director of Tilney Bestinvest. "Last week saw the annual eleventh-hour stampede of applications for Isas and pensions, with some even making these important long-term investments on the evening of Easter Sunday, when most people would surely prefer to be spending time with their family or friends than entering their debit card details and national insurance numbers on a website."

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Waiting until the end of the tax year to invest money is inefficient and means you don't make the most of the tax savings. You would be better off financially – and less stressed next spring – if you started your 2015-16 Isa now.

With a new tax year comes a new Isa allowance, so we all now have the option of putting up to £15,250 into an Isa before 5 April 2016. If you wait until the end of the year, any growth the money enjoys in the mean time will be taxed.

A £15,000 lump sum placed in an account earning 2 per cent interest would earn £60 more in an Isa rather than a standard account. And data from Tilney Bestinvest shows that in 14 of the past 20 tax years the FTSE All Share has delivered a positive return, so the odds are that the earlier you invest in a stocks and shares Isa the better.

If you are looking for a cash Isa act fast to get a good deal, as many banks and building societies pull their best deals once Isa season (the period before the beginning of the new tax year) is over. The best instant access rate available now is 1.55 per cent from the West Brom. Or if you want to fix Virgin offer 2.35 per cent for a five-year bond, or Leeds Building Society offers 2.2 per cent for a three-year bond, and Virgin pays 1.65 per cent for a one-year bond.

Those people who don't have a lump sum to put in an Isa but plan to start saving have two options. If you want to invest your savings then drip-feeding your money into a stocks and shares Isa now rather than waiting to move a lump sum at the end of the year is also a good idea.

"Investing regularly should help to reduce market timing risk as you'll end up with 'pound cost averaging', an average entry price that reflects some days when the market is up and others when it was down," says Hollands.

But, if you want to build up your savings in cash then don't bother with an Isa just yet. You will be better off going for a regular savings account. These reward monthly deposits with a higher interest rate. If you hold a current account with First Direct or M&S Bank you can get a regular savings account paying 6 per cent. Otherwise the best offer is 4 per cent from Saffron Building Society or KentReliance. Those are all better rates than you can find in Isas so use them to build up your savings pot then move it into an Isa after a year when the account matures.