This year’s Isa season has emerged as one of the weakest in history, with retail investors halting contributions due to escalating Middle East tensions and a broader market slump. Data from Calastone, a fund distribution platform, reveals a record £1.4bn net outflow from UK equity funds in March—the worst monthly performance since 2015. Bond funds also suffered, losing £535mn as rising yields triggered price declines.

The timing couldn’t have been worse: March, typically a peak month for Isa subscriptions, saw investors abandon tax-efficient wrappers as geopolitical volatility spooked markets. Calastone’s records show every equity sector fell except North America-focused funds, while gold and silver saw brief interest late in the season. Industry experts attribute the slump to lingering fears over potential tax cuts proposed by Chancellor Rachel Reeves, which had already dented autumn investments. Yet some investors, like those advised by Evelyn Partners, are using Isas to hold cash temporarily, preserving annual allowances without market exposure.

Wealth managers stress long-term optimism, noting the market’s pre-crisis strength and potential bargains in undervalued stocks. However, the tax landscape remains a concern, with capital gains outside Isas facing harsher treatment. Broader implications loom: the UK fund industry’s struggles could signal deeper investor confidence issues. Retail outflows and sector-wide declines underscore systemic risks, even as platforms like Hargreaves Lansdown report last-minute surges in global equity trackers.

The market’s resilience hinges on stabilizing geopolitical risks and clarity around fiscal policy.