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Individuals savings accounts (ISA) provide a fantastic way to shelter your money from the proverbial taxman. But there\u2019s more to tax-effective saving than simply opening an account and topping it up each year.<\/p>\n
To make the most of your ISA in the 2025-26 tax year and thereafter, here are seven of the biggest mistakes to avoid.<\/p>\n
1) Choosing the wrong ISA for you<\/p>\n
In 2023-24 we paid into more than 15 million adult ISAs \u2013 the highest number in 13 years \u2013 but cash is undoubtedly king, accounting for nearly 10 million of those plans.<\/p>\n
We\u2019re also paying a lot more into cash ISAs: nearly \u00a370 billion over the course of that year, compared to \u00a331 billion into stocks & shares ISAs<\/a>.<\/p>\n Cash ISAs provide a sensible home for any money you might need in an emergency (three to six months of expenditure) plus anything you might need in the near future for holidays and so on. But, for any money that you\u2019re unlikely to need in the next five to 10 years, it\u2019s worth considering a stocks & shares ISA for better growth potential.<\/p>\n Although the value of your investment will invariably rise and fall, over time stocks and shares will likely perform better than cash.<\/p>\n According to analysis from Moneyfacts, since 2010 the average return on cash ISAs is 1.79% a year, compared to 6.79% in stocks & shares ISAs.<\/p>\n That means \u00a31,000 invested in cash 15 years ago would now be worth approximately \u00a31,300, compared to \u00a32,300 if it was invested in a stocks & shares ISA.<\/p>\n Although investing can seem daunting for first-time investors, you can reduce risk by investing in \u201cbalanced\u201d funds with exposure to a broad range of global stocks and shares. Drip-feeding money into the markets each month is also less risky than exposing a big lump sum to the markets in one go.<\/p>\n 2) Thinking you can pay into only one ISA a year<\/p>\n Although there have previously been complicated rules restricting the number of ISAs you can pay into, these have been relaxed in recent years – you can now pay into as many different cash and stocks & shares ISAs as you like.<\/p>\n Children, however, can have only one cash and one stocks & shares Junior ISA<\/a>, and you can also pay into only one Lifetime ISA a year.<\/p>\n 3) Buying new funds every year<\/p>\n For established stocks and shares investors, the temptation is to go shopping for new funds every ISA season. There might be a sector that has performed particularly well over the last year, or you might have seen some interesting recommendations in the press.<\/p>\n But the danger with this approach is that, over the years, you could end up with a portfolio that looks like the cupboard under the stairs. Your money will likely end up scattered all over the place with little structure or organisation. <\/p>\n It\u2019s better to maintain a balanced portfolio \u2013 with money split between equities, fixed interest and cash according to your attitude to risk (referred to as asset allocation). The greater your attitude to risk, the more you can afford to allocate to equities. Within equities, you should also ensure you\u2019re invested across a broad range of stocks and shares, spanning different sectors and geographical regions. Also note that many funds will invest in the same companies so, if you don\u2019t check, it\u2019s easy to end up overlapping.<\/p>\n Check key features of funds<\/a> for the lowdown on top holdings and geographical breakdown.<\/p>\n For most investors, it will make more sense to top up their existing holdings, rather than buying something new. This might mean spreading money across them all or taking the opportunity to rebalance your portfolio and restore your original asset allocation (for example buying more bonds if strong returns mean your portfolio is a bit top-heavy equity wise).<\/p>\n Or, if your portfolio is already feeling like too much of a mixed bag, it\u2019s worth taking the time to add a bit more structure, selling any funds that aren\u2019t bringing anything helpful to the party.<\/p>\n If portfolio building feels a bit too much like hard work, it\u2019s possible to buy multi-asset funds, designed to be core holdings, that do the job for you. Or, your investment platform might offer a Managed ISA<\/a>, made up of pre-selected funds, that matches your risk profile.<\/p>\n The reason we invest is to make our money grow. But chasing down the fund with the biggest returns isn\u2019t the way to go about it \u2013 particularly if you\u2019re only looking at performance over the last year.<\/p>\n The fund could be too risky for you and recent stellar performance could easily be a flash in the pan. Instead, look for consistent performance and pay attention to returns over three, five and 10 years if you can.<\/p>\n Where you invest your money \u2013 that is, your asset allocation \u2013 is more important than picking out individual \u201cwinners\u201d within each area of your portfolio.<\/p>\n 5) Paying too much for your investments…<\/p>\n Over time, investment charges can take a substantial slice out of your ISA returns. This is particularly true of more costly actively managed funds (run by a human fund manager). <\/p>\n Higher charges can be justified if that translates into higher returns. But it doesn\u2019t make sense if your chosen fund isn\u2019t beating the index it\u2019s linked to.<\/p>\n Many investors will be better off switching to cheaper passive funds that track the index they\u2019re linked to. <\/p>\n According to analysis from S&P Global, over the last year only 16% of European equity funds outperformed their index \u2013 a figure that drops below 8% over 10 years.<\/p>\n It\u2019s also important to be aware that you could end up paying more for your investments if you are buying and selling frequently. It may be more cost-effective to \u201cbuy and hold\u201d. <\/p>\n If you do want to trade frequently, it\u2019s important to take trading costs into account when choosing your package or price plan.<\/p>\n 6) \u2026and your platform<\/p>\n In addition to keeping an eye on how much you\u2019re paying for your investments, it also pays to give some thought to the costs of the platform you hold them on.<\/p>\n By switching to a platform with lower charges, you\u2019ll be able to keep more of the money you make.<\/p>\n Most platforms charge a fee that is a percentage of your total holding. That means the bigger your portfolio grows, the more you pay in charges.<\/p>\n Depending on the size of your pot, you may be able to save money by switching to a platform with a low, fixed fee, that doesn\u2019t go up when your investments grow.<\/p>\n 7) Not making the most of your annual allowance<\/p>\n Each year you can pay a maximum of \u00a320,000 into ISAs. This can be into one ISA or several, so long as you don\u2019t exceed your allowance across all your accounts.<\/p>\n But you\u2019ll often hear it referred to as a \u201cuse it or lose it\u201d allowance. Simply put, any allowance you don\u2019t use before the end of the current tax year on 5 April cannot be rolled over to the new one.<\/p>\n Many people will fund ISAs with direct debits from current accounts or transfers from savings accounts. <\/p>\n However, it\u2019s important not to overlook any shares that you might have in trading or general investment accounts<\/a>, which could be subject to dividend tax or capital gains tax (CGT).<\/p>\n Using a process known as \u201cBed & ISA<\/a>\u201d, it\u2019s possible to sell shares in a trading account and immediately rebuy them within your ISA, without incurring any tax (so long as profits don\u2019t breach the annual exemption for capital gains \u2013 currently \u00a33,000 a year).<\/p>\n This not only shelters those investments from tax in the future, it\u2019s also a helpful way of soaking up any remaining ISA allowance for the year.<\/p>\n Although you can top up or open ISAs right up until the final hours of 5 April, you\u2019ll need to allow more time to complete a Bed & ISA. <\/p>\n Important information:\u00a0Please remember, investment values can go up or down and you could get back less than you invest. If you\u2019re in any doubt about the suitability of a Stocks & Shares ISA, you should seek independent financial advice. The tax treatment of this product depends on your individual circumstances and may change in future. If you are uncertain about the tax treatment of the product you should contact HMRC or seek independent tax advice.<\/p>\n interactive investor (ii) is an Aberdeen company. Aberdeen advise ii on the fund selection for the Managed ISA portfolios. The portfolios contain funds predominately managed by Aberdeen but may also include funds managed by other third-party managers. Please review the portfolio factsheets<\/a> for more details on the underlying funds. Find out more about how ii and Aberdeen work together.<\/a><\/p>\n These articles are provided for information purposes only. \u00a0Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. \u00a0The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.<\/p>\n Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company’s or index name highlighted in the article.<\/p>\n","protected":false},"excerpt":{"rendered":"Individuals savings accounts (ISA) provide a fantastic way to shelter your money from the proverbial taxman. But there\u2019s…\n","protected":false},"author":2,"featured_media":339416,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[138,246,111,139,69,244,245],"class_list":["post-339415","post","type-post","status-publish","format-standard","has-post-thumbnail","category-personal-finance","tag-business","tag-finance","tag-new-zealand","tag-newzealand","tag-nz","tag-personal-finance","tag-personalfinance"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/339415","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=339415"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/339415\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/339416"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=339415"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=339415"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=339415"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![\"Investor](\"https:\/\/www.newsbeep.com\/nz\/wp-content\/uploads\/2026\/03\/1774024514_101_green_2.jpg\")
4) Chasing returns<\/p>\n