Tax changes and market uncertainty drive investor behaviour this ISA season

• With less than two months until the tax year-end deadline, Nutmeg research¹ reveals that over a third (37%) of UK investors haven’t started using their ISA allowance yet
• 31% of investors are increasing ISA contributions to avoid capital gains tax changes, with 29% increasing ISA contributions ahead of proposed inheritance tax changes to pensions
• A quarter (25%) are sticking to cash savings amid concerns about market volatility

New research from J.P. Morgan-owned digital wealth manager Nutmeg, highlights how market uncertainty and changes to UK tax rules are driving investment behaviours this ISA season.

A survey of UK investors, undertaken by Opinium, reveals that 37% of investors haven’t started using their ISA for this financial year. Just one in five (20%) have already invested the full £20,000 ISA allowance, with women (24%) more likely than men (18%) to have used their full allowance.

Changes to personal taxation that were announced in the Autumn Budget are weighing heavily on consumer’s minds. A third (31%) of all UK investors plan to invest more in an ISA this year to mitigate changes to capital gains tax and 29% are intending to invest more in their ISA due to proposed changes to inheritance tax on pensions.

Claire Exley, head of financial advice and guidance at the J.P. Morgan owned digital wealth manager, Nutmeg, said: “We have seen a clear shift in investor behaviour since the autumn with more people moving their savings and assets into ISAs to minimise the amount of tax they may need to pay. No one wants to pay more tax than they need to and having the right ISA strategy can help to reduce your overall tax liability. The beauty of ISAs is that they can be a simple and efficient way to build a portfolio and invest towards medium and long-term goals while minimising your tax.”

Cash is a familiar friend for some

A quarter (25%) of investors say that they don’t plan to put money into a stocks and shares ISA this year and will keep their funds in cash savings. This rises to 35% among those above the age of 55. Nearly half (49%) of those prioritising cash savings said they were not feeling confident about securing positive investment returns this year.

However, after a strong year for markets globally in 2024, the research sought to understand investor sentiment ahead of the all-important ISA season. Investors are broadly optimistic about the investment outlook for 2025, with 58% saying they are confident for positive investment returns this year.  When it comes to asset allocation, 38% of investors are considering government and corporate bonds, while 33% are looking for returns from equities.

While some investors may be apprehensive to put new money into their ISA, over a third (35%) plan to transfer from old ISAs to new ones in the current tax year.

Exley concluded: “While cash can feel reassuring during times of market uncertainty, and it is sensible for investors to have a cash reserve with a competitive rate, inflation often erodes savings over the longer term. Short-term market volatility is unnerving, and reassurance can often be provided by speaking to an expert about your goals and portfolio diversification to find the best approach for you.

“Even if you don’t have new money to put into an ISA, this can be a good time to look at any ISAs you may already have and make sure they’re working hard for you. Whether it’s transferring to a new provider or reviewing your balance of cash and investments, a little financial admin could serve you well in the long run.”

As the tax year end approaches, Claire Exley has shared her top tips for investors:

1. Review your ISA contributions and check how much allowance you have remaining.  You don’t have to maximise the allowance for it to make a difference: the more you have invested, the more you can benefit from compounding on any potential growth and not having to pay tax on any returns. If you can afford it, you should aim to consistently save or invest towards your goals – a little top up now could make a sizeable difference over time.
2. Consider your balance of cash and investments, and ‘drip feeding’ future contributions. If you have money to invest but aren’t ready to put it into the markets all at once, the Nutmeg 100% cash pot feature allows you to use your 2024/25 ISA allowance by making your contribution and then ‘drip-feeding’ money into an investment pot over time.
3. Shop the market and consider switching providers to boost your investments. Transfer £10,000 or more to Nutmeg from your current investments and receive 1% cashback on the first £500,000 paid into your Nutmeg account. You can transfer ISAs, pensions, Lifetime ISAs, Junior ISAs or Child Trust Funds.²

¹ Opinium survey of 1,000 UK investors undertaken on the 9^th to 16^th January 2025. Opinium Research is a member of the British Polling Council and abides by its rules.

² Transfer £10,000 or more to Nutmeg from current investments and get 1% cashback on the first £500,000 paid into a Nutmeg account. You can transfer ISAs, pensions, Lifetime ISAs, Junior ISAs or Child Trust Funds.  Initiate by 30.05.25 and keep invested until 30.05.26. Product rules and T&Cs apply. Capital at risk. Compare benefits before transferring. To register or for more information visit: https://www.nutmeg.com/promo/tye-transfer-offer.