On top of the last-minute dash to beat the ISA deadline seen every year, deep-pocketed investors are also rushing to use their capital gains tax allowance too, before it more than halves overnight.
In the autumn statement last November, Chancellor Jeremy Hunt cut the allowance available to taxpayers liable to capital gains tax from £12,300 to £6,000 from 6 April 2023 and then from April 2024 it will be cut to £3,000.
Capital gains tax is payable when you sell shares, land and property, including second homes or shares held outside of a tax-free wrapper like an ISA.
Sarah Coles, head of personal finance at Hargreaves Lansdown PLC (LSE:HL.), said the investment platform always sees a steady stream of investors shifting cash into their ISAs and "as usual we expect some people to take advantage of their allowances right up to 11.59pm" on 5 April, she told the Evening Standard.
There are four types of ISA for adults - cash, stocks and shares, lifetime and innovative finance - but individuals can invest up to £20,000 in only one ISA each tax year.
You can also can get a junior ISA for children under 18, so a parent if they were lucky enough to have already invested their full allowance, might also put some of their spare dosh into one of those.
But it's not the end of the world to miss the deadline and there are many early birds who also look to duck tax by getting in later in April.
"As a general rule, the earlier you use your ISA allowance in the tax year, the better, and this year getting in as soon as possible is particularly valuable," Coles said.
Hargreaves and rivals such as AJ Bell, Interactive Investor, Best Invest and Fidelity also see a rush of those who not only squeeze in before the end of the tax year but also show commitment to getting ahead of the game for the next tax year.
By investing early, she said an ISA investor would get an extra year of protection from tax.
"If you hold investments outside an ISA, the fact that the dividend tax allowance has been halved, to £1,000, means investors run the risk of paying tax on their dividends far earlier in the year."
By switching them into an ISA, using the Bed and ISA process, the investments are protected from this tax immediately.
With the cutting of the capital gains tax allowance, investors planning to realise gains early in the tax year "risk busting their allowances", Coles said.
"Switching into an ISA on day one gives you the freedom to sell what you want when it makes the most sense for your finances, without thinking about tax.
"Starting early gives you the opportunity to set up regular monthly payments into a stocks and shares ISA each month, and automatically spread your investments across the tax year.
"By drip feeding your money into stock market ISAs, you will take advantage of market falls, through what’s known as pound cost averaging.
"If you invest a fixed sum every month you will be able to buy more units when a fund’s value falls, providing the potential for greater profits when they have risen in value."
ISA confusion
There were 12mln adult ISA accounts subscribed to in the tax year ending 2021, down from 13mln in 2019 to 2020.
Despite the popularity of ISAs and the fact they have been around for more than two decades, there is still plenty confusion about how they work, according to research by Charles Stanley (LSE:CAY).
A poll of 'mass affluent' consumers showed 19% thought it was only possible for someone to have one type of ISA at a time.
Charles Stanley said while you can only pay money into one ISA of each type in a particular tax year, a person can split their allowance of £20,000 between a Cash ISA and a stocks and shares ISA, but not between two stocks and shares ISAs.
There was 16% of respondents who thought it is possible to top up an ISA allowance from previous years' unfulfilled contributions.
However, the annual allowance of £20,000 is a ‘use it or lose it’ in each tax year.
Some 14% thought ISAs are only for cash savings, being unaware of stocks and shares ISAs, while another 11% think it is not possible to take your money out of an ISA, which is also untrue.
"You can even withdraw any amount of money from your ISA (from the current or previous tax years) and replace it in the same tax year without losing your allowances built up or counting towards your current one – so long as your provider offers a ‘Flexible ISA’," said Charles Stanley.
Other misconceptions included that people have to use your full ISA allowance in order to qualify for one (10%), that any interest earned within an ISA is taxed (9%), that investors need to keep your ISA in the same place forever (8%), and that you can only access an ISA via a financial adviser (7%).
The research found that 74% of respondents did not know what a flexible ISA is, with 27% never having never heard of one.
Rob Morgan, chief investment analyst at Charles Stanley, said the confusion about how ISA work "brings into question whether consumers are making the most of their ISAs, but also if they understand what other tax efficient savings vehicles there are to utilise, such as pensions.
"With the ISA deadline fast approaching, it’s important that Brits make best use of their tax allowances – there’s no going back once we enter a new tax year on 6th April, so it’s best to use it rather than lose it.”
He also advised those last-minute ISA investors not to rush into an investment decision, noting that the cash can be secured within a stocks and shares ISA wrapper now and a fund or share decision made later.