As the new tax year unfolds, investors are presented with an opportunity to reassess their financial strategies, particularly regarding their Individual Savings Accounts (ISAs). With a tax-free allowance of £20,000 per person, financial experts have highlighted a range of funds that promise potential growth and diversification, especially in the face of ongoing market volatility. This article delves into expert insights to help you navigate your investment choices for the 2026 tax year.
The Case for Stocks and Shares ISAs
In an environment where stock markets exhibit significant fluctuations, many may hesitate to invest in equities. However, experts suggest that adopting a long-term perspective with a stocks and shares ISA is likely to yield better returns compared to the safety of cash deposits. According to Dan Moczulski, managing director at eToro UK, the average stocks and shares ISA has appreciated by approximately 11 per cent over the last year, compared to a mere 3.48 per cent return from cash ISAs. Given the current UK inflation rate hovering around 3 per cent, sitting on cash is not a prudent strategy.
The average value of a stocks and shares ISA now exceeds £65,000, significantly outpacing the typical cash ISA, which holds less than £13,500. This disparity underscores the wealth-building potential of equities, particularly when earnings from stocks are free from taxation within an ISA framework.
Expert Fund Selections
To guide investors in their decision-making, we consulted five financial experts, each recommending a fund they would personally invest in, reflecting their insights and market knowledge.
Scottish Mortgage FTSE 100
Annabel Brodie-Smith, communications director of the Association of Investment Companies (AIC), advocates for the Scottish Mortgage FTSE 100 investment trust, managed by Baillie Gifford. This trust aims to invest in innovative private companies such as SpaceX and Revolut, as well as established public entities like Meta and Nvidia. It currently trades at a 5 per cent discount and boasts low annual charges of 0.31 per cent. With a remarkable 27 per cent rise in the past year and a staggering 68 per cent increase over five years, this investment is tailored for those with a high-risk appetite.
iShares Over 15 Years Gilts Index Fund (UK)
Alan Miller, chief investment officer at SCM Direct, champions the iShares Over 15 Years Gilts Index Fund, a vehicle focused exclusively on UK government bonds. It holds a diversified portfolio of 27 gilts with net assets amounting to £2.95 billion and carries a minimal annual charge of just 0.1 per cent. Miller points out that with gilt yields nearing multi-decade highs, securing a yield of approximately 5 per cent within an ISA is a remarkable opportunity. This fund has remained relatively stable over the past year, with a modest 9 per cent increase over five years, but as interest rates rise, its prospects appear more favourable.
Man Income Fund
Paul Agnell, head of investment research at AJ Bell, highlights the Man Income fund, which targets undervalued UK companies across various market capitalisations. This fund has witnessed a strong start to 2026, surging over 10 per cent in the first two months, following a 28 per cent gain in 2025. The fund’s management focuses on identifying firms with solid cash flows and assets, ensuring a strategic approach to avoid potential value traps. With an annual charge of 0.9 per cent, the fund remains a compelling option for those seeking income and growth.
Murray International
Philippa Maffioli from Blyth-Richmond Investment Managers recommends Murray International, which offers global diversification alongside a yield of around 3.5 per cent. This fund prioritises dependable cash flows and sensible valuations, avoiding the high-yield chase that can lead to riskier investments. Under the stewardship of Martin Connaghan and Samantha Fitzpatrick, the fund has achieved a 36 per cent increase over the last year and a 60 per cent rise over five years, with an annual fee of 0.5 per cent. Reinvesting dividends could lead to robust compounding over time.
Pantheon Infrastructure Plc
Jonathan Moyes, head of investment research at Wealth Club, presents Pantheon Infrastructure Plc as a unique opportunity to diversify away from traditional equity markets. This fund co-invests with leading global infrastructure managers in critical assets such as data centres and renewable energy projects. Currently trading at a 13 per cent discount to its net asset value, it offers potential for attractive returns. However, investors should be mindful of the inherent risks associated with this high-risk investment, which has gained 30 per cent in the last year.
Navigating Investment Costs
Investors should also consider the costs associated with their chosen platforms, as share dealing fees can erode long-term returns. Each fund carries its own charges, and while some may be minimal, it is essential to factor these into overall investment strategies to optimise outcomes.
Why it Matters
As the economic landscape continues to evolve, the decisions made by investors in the 2026 tax year could have lasting implications for their financial futures. With inflationary pressures and market volatility, selecting the right funds within an ISA can enhance wealth accumulation while minimising tax liabilities. Engaging with expert insights not only fosters informed decision-making but also encourages a diversified approach, crucial for navigating these uncertain times. By strategically leveraging the available tax-free allowances, investors can position themselves for sustained growth and security in their financial portfolios.
