
ISA season 2025 deadline: Last-minute picks for your portfolio
We are just a couple of days away from the deadline for the 2024/25 ISA season. If you haven’t used your full £20,000 allowance, you’ve got until 5 April 2025 to add that money to an ISA.
ISAs are one of the most efficient ways to save or invest, this is because they are placed within a ‘tax-wrapper’, which shields your returns — whether they come from interest, dividends, or capital gains — from tax. This comes at a time when everyone is feeling the pinch from rising taxes and bills, while interest rates also remain high compared to recent history.
Research by Fidelity recently pointed out that the tax burden in the UK is now at the highest level since the Second World War – with more people being pulled into the higher tax bracket due (40%) due to tax thresholds being frozen until the tax year 2027-28*.
Figures from the Institute of Fiscal Studies show that only 3.5% of adults in the UK paid the 40% tax rate in 1991-92; this figure is estimated to reach 14% (7.8m adults) by 2027-28**. It is also estimated that one fifth of under 40s will be pulled into the higher additional rate by this point***.
In short – many people will feel they are simply paying too much tax! ISAs allow you to grow your investment pot free of capital gains and income tax. Giving you the ability to plan for your long-term goals in life.
With this in mind, here are a few last-minute choices to consider for your portfolio.
One-stop shop
If you are uncertain about what asset class, region or style to invest in you can always use a multi-asset fund. They differ from traditional funds by targeting a specific investment outcome, such as a return above inflation, rather than performance against a specific benchmark, instead, the managers of these funds often have the flexibility to invest across asset classes, geographies, styles and other investment managers. The ultimate goal is to create a flexible range of investment instruments that can seek out growth opportunities as the market environment changes, while carefully managing risk. Essentially, they take the decision of what and where to invest out of your hands.
Aegon Diversified Monthly Income manager Vincent McEntegart draws upon all of Aegon’s investment capabilities to build this multi-asset portfolio using the most attractive income opportunities the team has identified. The manager decides how much to allocate to equities, fixed income, property, and specialist income sectors (such as infrastructure and renewable energy) to spread the risk and balance the sources of income. The fund targets an attractive yield (around 5% per annum), which is paid monthly. The fund has returned 43.6% to investors in the past five years****.
An alternative to consider is M&G Episode Income, a portfolio that invests directly in individual stocks and bonds, while property exposure is achieved by investing in property funds. Manager Steven Andrew uses behavioural finance to find pockets of value and invest against the herd, rather than following it.
The income payer
There is a strong argument to suggest that if you want to buy just one fund, a strategy focused on generating regular income through investments – like dividends from stocks or interest from bonds – is the safest route. There are a couple of ways investors can approach using income funds. One is to simply take the dividends paid out – be it on a monthly, quarterly or annual basis – to pay for their needs in life as and when they occur. The second is reinvesting your dividends.
One worth considering here is Jupiter Monthly Income Bond, which currently yields just shy of 7%**** to investors. The fund runs quite a short duration, meaning it is less exposed to interest rates versus many other bond funds. Manager Hilary Blandy generates alpha through a flexible allocation between investment grade and high yield; sector and regional allocations across emerging markets; and individual bond selection. Over the past five years it has returned 35.8%**** with lower volatility when compared to its peers.
From an equities perspective, the UK is the most mature dividend-paying market in the world. Shareholders in companies listed on London’s main market received £92.1bn in dividend payments during 2024*. Janus Henderson UK Responsible Income is a sustainable portfolio with a bias towards mid-caps. Manager Andrew Jones looks for a balance of growth as well as an attractive income to make for a strong all-round fund.
Managing director’s choice
Economic, regulatory and geopolitical uncertainty has seen Chinese equities fall out of favour for the past four years. However, recent policy announcements made in September 2024 have acted as a catalyst for improved performance, with Chinese equities up 33.5% in the past six months alone.^^
Managing director Darius McDermott says: “I feel China is starting to turn the corner as there is potential for much more stimulus to get the economy moving. Despite the recent upturn, the market is still relatively cheap so you can get bang for your buck.”
He cites Fidelity China Special Situations as one worth considering. Managed by Dale Nicholls, the trust invests predominantly in companies listed both domestically in China and on the Hong Kong Stock Exchange. The trust has a bias towards mid and small-sized companies. In addition to cheap valuations, this trust is operating at an attractive 7.7% discount^^^.
Small-cap opportunities
Small-caps have struggled in recent years as larger companies (notably the tech behemoths in the US) have outperformed. However, historical evidence shows that small-caps outperform large-caps over time, particularly following periods of underperformance and economic recovery.
Managed by Nish Patel, the Global Smaller Companies Trust looks to strike a balance by tapping into the faster growth of smaller companies (developed and emerging markets) but with lower risk. The trust specifically targets high-quality business franchises at attractive valuations. The trust has been an excellent long-term performer and is on an attractive discount of 11.4%.
Regional small-caps to consider include the WS Amati UK Listed Smaller Companies and Artemis US Smaller Companies funds.
The consistent performers
Whenever we look at fund performance, it’s all too easy to become drawn to the portfolios boasting the highest returns. After all, we all like to see our investments rising in value. But consistency is also an important factor – so we also like funds that make money each and every year.
One such fund boasting a perfect record of positive returns in each of the past 10 years is Guinness Global Equity Income. Managed by Matthew Page and Ian Mortimer, the fund is different because it invests in 35 companies, and each position is equally weighted. This, together with their one-in, one-out policy means there isn’t a long tail of smaller holdings, so each stock can make a meaningful contribution to performance. It also yields 2.6%^^^^^.
Another with an unblemished record over the past decade is Polar Capital Biotechnology, while the M&G Japan fund has produced a positive return in nine of the past 10 years^^^^.
*Source: Fidelity, 18 March 2025
**Source: Institute of Fiscal Studies, 16 May 2023
***Source: IFA Magazine, 1 August 2024
****Source: FE Analytics, total returns in pounds sterling, 31 March 2020 to 31 March 2025
^Source: Link Dividend Monitor, Q4 2024
^^Source: FE Analytics, total returns in pounds sterling for MSCI China, 23 September 2024 to 31 March 2025
^^^Source: Association of Investment Companies, 31 March 2025
^^^^Source: FE Analytics, total return figures from 2015-2024 inclusive
^^^^^Source: FE Analytics, 31 March 2025