While saving for your future rarely takes a breather, each new tax year that starts on the 6th of April offers a valuable opportunity to audit your savings and plan your strategies for the year ahead. 

Individual savings accounts are heavily affected by new tax years because of their tax-efficient £20,000 allowance for Cash and Stocks and Shares ISAs, which resets to allow investors to continue building their tax-free savings. 

Because your ability to save money into ISAs refreshes each April, so too can your approach to building savings. 

But what measures should you take to ensure that each year is a successful one from an investment perspective? Let’s take a look at six essential ways to master the art of ISA saving in a new tax year: 

1. Shop Around for Better Rates

Sometimes the grass really is greener elsewhere, and to successfully maximise your ISA savings, you should always maintain a curious mindset when it comes to window shopping for better rates. 

When deciding how to shape your Cash ISA investing for a new tax year, shopping around for the best rates can make a big difference. Different providers can offer different rates, so it can really pay to switch your accounts if you see better options elsewhere. 

There are plenty of comparisons available online to help shape your search for better rates, so taking the time every now and then to explore the Cash ISAs available to you can really pay off. 

2. Get Started Early

There’s no time like the present when it comes to building your ISAs in the new tax year. According to Vanguard research, investing £20,000 at the beginning of each tax year, rather than waiting until the end, can make a significant difference over time. 

According to the analysis, investing £20,000 on the 6th of April, the day the new tax year begins, rather than on the 5th of April (the final day of the tax year), at an annual return of 5.5% would lead to £56,000 more in earnings over the course of 25 years. 

Of course, it can be difficult for even the most affluent of investors to save £20,000 at the beginning of each tax year, but it certainly shows that it pays to get started early with your savings. 

3. Get Tactical About Dividends

With cuts to dividend income allowances pushing tax-free thresholds down to £500, it’s worth using the new tax year to rejig your strategy on stocks that pay dividends. 

If you have investments spanning beyond your ISA, you can make the most of your Stocks and Shares ISA’s tax efficiency to load up on the dividend stocks that you would be liable to pay tax on as a means of avoiding a costly tax payout. 

4. Diversification Adds Resilience

If you have a Stocks and Shares ISA, it can be tempting to place the vast majority of your funds into one particular type of investment. This may be because you know the industry well or are confident in certain stocks growing over time. 

While it’s an advantage to invest in what you know, we’ve seen time and again how unforeseen circumstances can harm the performance of industries in both the short and long term. 

Companies can go bust due to a number of factors, and industries can struggle for years on end due to geopolitical policy shifts, natural events, or a number of other challenges. 

To protect against this, be sure to hold a mixture of investments within your ISA. Diversifying your portfolio can improve the potential for sustainable long-term returns without the threat of one investment undermining the overall performance of your strategy. 

5. Get Smart with Allowances in Your Family

If your partner doesn’t typically use up their full ISA allowance each tax year but you do, an easy way of maximising your tax-free efficiency is to incorporate their spare allowance into your new tax year strategy. 

Whether you’re married or in a civil partnership, it’s possible to combine ISA allowances to save up to £40,000 each tax year, helping to significantly improve your tax-free earning potential. If you have a child, then their £9,000 Junior ISA (JISA) allowance could expand your saving prospects even further. 

Just be sure to clearly communicate your ISA strategy with your partner before using their allowance to avoid confusion later down the line. You should also be mindful that money invested in JISAs can’t be accessed until your child turns 18. 

6. Refine Your Risk Appetite

Most Stocks and Shares ISA providers will ask you to specify your level of risk appetite when opening your account. When a new tax year arrives, it could be worth auditing your preferred level of risk to better match your changing financial goals and ambitions. 

When it comes to investing with ISA providers, many will clearly display their historical performance based on different levels of account risk. Because speculative stocks have generally performed well in recent years, many riskier investment strategies have increased the earnings of Stocks and Shares ISA holders, but these investments are more vulnerable to market downturns. 

Take a moment each tax year to reassess the amount of risk that you’re willing to take on to have an ISA that reflects your attitude to investing. 

Making a Fresh Start

Each new tax year is a fresh opportunity to make strides as an ISA investor with a strategy that matches your changing financial goals. 

Taking the right measures to maximise your tax-free allowances and to manage your accounts based on your preferred level of risk will help to create a sustainable strategy that continues to pay dividends long into the future. This paves the way for a level of passive income that you can trust.