The new 2025-26 ISA year is just a few weeks away. And with it comes a whole new ISA allowance that we can use for long-term, tax-free investment. The current limit is £20,000 a year for an adult ISA, and £9,000 for a junior ISA. So how should we prepare ourselves?

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Dream a little

It makes sense to pay down any non-mortgage debt and set aside an emergency cash reserve before putting money in a Stocks and Shares ISA. After that, I think it can give us a big motivational boost to work out just how much we might be able to build.

I’ve done exactly that using Aviva (LSE: AV.) as an example. It’s one of my own ISA picks, and current forecasts put the dividend at 6.6%. That’s close to long-term average FTSE 100 returns of 6.9% a year, so it seems like a fairly representative choice.

A full £20,000 split monthly and invested in Aviva stock every year could grow to more than £810,000 in 20 years. That’s more than double the total invested, and it’s only from reinvested dividends. Any share price rises would be on top of that, and it would only take 2% a year to push the total to over a million.

Now, the Aviva dividend’s not guaranteed, and I see a fair chance the long-term average will be lower. It was slashed for 2019, for example. But I think it’s a good candidate for how long-term FTSE 100 gains could turn out.

And I definitely wouldn’t put all my ISA money in one stock, especially not with an insurance company like Aviva. It faces short-term risks and typically more volatility than the market average. And after a good couple of years, I think Aviva might be fully valued now. And that takes me to the next thing…

Check the ISA winners

The share price chart above shows a couple of interesting things. Aviva shares are up around 50% in the past five years. But they’ve fallen since 2022, with lots of short-term ups and downs.

The stock market works best for long-term investors, but diversification‘s at least equally important. And a look today at what the UK’s most successful ISA investors do with their money shows one way we can achieve it quickly.

Millionaire ISA investors typically have more of their money in funds and investment trusts than average. By picking an appropriate one we can invest our cash across, say, a wide range of dividend-paying FTSE 100 stocks and spread the risk.

Work out a strategy

I believe a new Stocks and Shares ISA investor should seriously consider putting their first couple of years’ cash into investment trusts. As well as diversification, they can help us learn about a number of different strategies… income, growth, small-caps, developing markets etc.

And spending a bit of early time investigating these can provide an extra boost. It can help us develop the strategy that suits us best for moving on to individual stock buys. And we can even start thinking about it now, before we plonk down our first penny.