How to become an ISA millionaire
Becoming an ISA millionaire might not be as out of reach as you think. We’re proud that 1,001 ISA Millionaires have chosen our platform to reach this milestone. And you can do it too! All it takes is time, patience and compounding returns.
Read on to find out how our ISA millionaires built their pot up.
Important information - investment value can go up or down and you could get back less than you invest. If you're in any doubt about the suitability of a Stocks & Shares ISA, you should seek independent financial advice. The tax treatment of this product depends on your individual circumstances and may change in future. If you are uncertain about the tax treatment of the product you should contact HMRC or seek independent tax advice.
What is an ii ISA Millionaire?
An ii ISA Millionaire is someone who has over £1 million in their Stocks and Shares ISA through investing. Because you can only contribute £20,000 per tax year to your ISA, the only way to reach ISA millionaire status is from maximising contributions and year-on-year growth.
How do ii ISA Millionaires invest?
Investment trusts are affected by more factors than funds, such as supply and demand. This can make them riskier for short-term investing, but their potential gains for the long term make them appealing to our ISA millionaires.
Cash is less popular with our ISA millionaires, suggesting the focus is more on growth through investing. That isn’t to say it should be avoided; our cash interest rates can help you compound returns in your ISA too.
Assets in ISA's by instruments
ii ISA Millionaires
All ii ISA's
|ETP (Exchange Traded Products)
Source: interactive investor, ISA holdings as at 31 January 2024
The tax year always starts on 6 April, giving you a fresh £20,000 ISA allowance to take advantage of. In 2023, 40% of our ii ISA Millionaires got in early and contributed their full £20,000 allowance by the end of April.
Early-bird investing in your ISA means that your money can start growing for you sooner. It’s almost a year longer than if you were drip feeding in cash throughout the year.
Contributing across the year and making monthly payments still has its benefits. This can be ideal for anyone who doesn’t have £20,000 to deposit at the start of the tax year, and it can remove some risk from market timing.
What are the most held investments among ii ISA Millionaires?
Take a look at what our ISA millionaires most-held investments are. You’ll see lots of well-known blue-chip companies, but the majority – 9 out of 10 – are all regular dividend payers.
Dividends are great as they don’t use up any of your annual allowance, meaning you can add to the tax-free cash to invest in your ISA. You can even set this up to happen automatically, using our dividend reinvestment service with reduced commission.
Top 10 most held investment (by number of customers holding among ii ISA Millionaires and broader ii ISA cohort. Source: interactive investor 31 January 2024
So, how can I become an ISA millionaire?
Becoming a millionaire is quite an achievement. Having an ISA means you can reach this in less time because you won’t pay tax on income or capital gains.
With careful planning and some good investment choices, you can become an ISA millionaire. We’ve got some top tips to help you reach this financial goal.
Maximise your contributions
The size of your ISA portfolio depends on how much you invest and how much return you generate. So the more you can invest, the greater your money can grow.
Contributing a small regular sum and choosing the right investments can soon grow your pot. But making sure you use your full ISA allowance per year is the only way to maximise your ISA’s true potential.
Invest as soon as you can
Your investments can’t give you impactful returns unless they have time to grow. The longer your money is invested, the more time it has to grow.
That’s why investing as soon as you can in the tax year is important. As we see in the data from ii ISA Millionaires, nearly half of them are maxing out their ISA allowance in the first month of the tax year.
And the earlier in life you start, the smoother your journey towards becoming an ISA millionaire may be. But there’s no wrong time to start, just make sure you don’t miss out on using any of your annual allowances.
Be consistent, patient and disciplined
The stock market will always rise and fall. It might be tempting to jump ship when the market turns against you, but holding firm might be the better option.
It may seem counter-intuitive at the time, but long-term patience pays. Leaving your money invested and adding to it allows compound interest to build up in your favour.
Few can predict how the market will behave, but committing to ride the high and lows could bring you a better result.
Use dividend reinvestment
Most of the top 10 investments that ii ISA Millionaires held are ones that pay dividends. You can take these dividends out as cash, but reinvesting them back into funds or shares can help grow your pot.
When you invest in funds, you’re given the choice between ‘accumulation’ units and ‘income’ units. Accumulation units automatically reinvest any money earned back into the investment, while income units transfer any growth to you as cash.
If you invest in individual shares, many investment platforms, like ii, offer an automatic dividend reinvestment service. You just need to set it up then let the reinvesting roll on.
The decision to reinvest income will come down to personal circumstances, but it can be an effective way of boosting your money’s earning potential – especially over time with compound interest.
Diversify your portfolio
Putting all your eggs in one basket isn’t the best investment strategy. Our own ISA millionaires know this, and it shows in how they’ve diversified their portfolios. Primarily focusing on investment trusts, but also balancing that with other investment types looks to be key to their success.
Remember that this trend is never guaranteed. In fact, the one thing you can be sure of is that there will be rough patches along the way.
Investing doesn't need to be taxing.
Each year, you have allowances you can use, for your ISA and pension, to maximise the tax you save. But the countdown to the final day to use them – 5 April – is now on.
Get tax savvy and find out how your allowances can help you get the most from your money.
Learn more about our Stocks and Shares ISA
Learn how to make the most of your Stocks and Shares ISA with our useful guides.