Number of ISA millionaires triples in three years

The number of ISA millionaires has more than tripled in three years, according to a Freedom of Information request to HMRC.

In 2022/23, there were 3,180 ISA millionaires. This compares to 1,030 three years ago, and just 570 eight years ago.

Analysis by the investment platform InvestEngine reveals that there are also 7,000 people in the UK with ISAs worth between £750,000 and £1 million, while 30,000 have between £500,000 and £750,000 in their ISAs.

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The figures come as Rachel Reeves prepares to deliver her Autumn Budget next week, with speculation growing that the chancellor could impose a lifetime limit on ISA savings. It has emerged that Reeves previously floated the idea of a £500,000 limit in a newspaper column in 2016.

Savers and investors can contribute up to £20,000 a year into their ISAs, but there is no cap on how much they can save in their lifetime.

Subscriptions into ISAs have been surging in the run-up to the Budget. The investment platform Bestinvest said ISA contributions rocketed 156% in September compared to the same month in 2023.

The investment giant Vanguard has seen a 43% increase in the number of clients using up their ISA allowance, while Interactive Investor has seen the number of customers maxing out their ISAs soar 65%.

Some of this behaviour has been to beat any potential changes to ISAs in the Budget - which will be delivered on 30 October - as well as any hikes to capital gains tax.

Notwithstanding any announcements in next week’s Budget, ISAs are a great way to grow your wealth tax-free - as is evidenced by the thousands of people who have managed to turn themselves into ISA millionaires. We look at how they’ve managed to hit this milestone.

How to become an ISA millionaire

To amass a £1 million fortune in your ISA, you’ll almost certainly need to invest, rather than use a cash ISA.

Andrew Prosser, head of investments at InvestEngine, comments: “The number of ISA millionaires has increased significantly over the past few years, but we can be confident that most people with really big sums are in stocks and shares rather than cash ISA holders.

“That is because, even someone who has put the maximum in a cash ISA every year since they were launched in 1999 would be at around £275,000 – a great sum, but well short of millionaire status.”

Over the past decade, the average annual return on stocks and shares ISAs has been 9.64%, while over that same period, the return for a cash ISA has been just 1.21%.

According to InvestEngine, if those averages continue, those who put away the maximum amount into a stocks and shares account could be an ISA millionaire by 2043 - 19 years from now. By comparison, it would take someone with a cash ISA earning the average rate of interest until 2063 - an extra 20 years - to reach the millionaire milestone.

Prosser adds: “Getting started early each year, even with just small amounts, and not leaving investing until the end of the tax year, creates the potential to grow large sums for later in life.”

We reveal what type of investments and which funds are most popular with ISA millionaires in More investors are becoming ISA millionaires – where are they putting their money?

If you have money in low-interest accounts, consider switching it to a higher-paying savings account, or into a cash ISA or stocks and shares ISA. Using an ISA will protect your money from the taxman, which could be particularly valuable given tax hikes are widely expected in the Autumn Budget.

Will we see ISA changes in the Budget?

ISAs are incredibly popular. About 22 million people have an ISA, with their total market value worth £725 billion.

Previous governments have increased the annual allowance to the cheers of savers and investors. In 2017/18 George Osborne hiked the allowance from £15,240 to its current £20,000, turning the humble ISA into a “super ISA”.

So, it would be a brave chancellor to tinker with ISAs and reduce their generosity.

As with all Budget rumours, there has been no official word from the government. We know that Reeves has spoken of a £500,000 limit, but that was eight years ago, long before she became chancellor and the economic picture looks very different now.

But of course, the economic picture looks very bleak, according to the Labour government, and we are regularly reminded that next week’s Budget will contain “tough decisions”.

One expert who thinks ISAs could make an appearance in the Autumn Budget is Elsa Littlewood, private wealth tax partner at the accountants BDO. She says ISAs are costing the Exchequer almost £5 billion a year in tax relief.

“Cutting this cost by reining in ISA benefits for wealthy investors might be seen as an easy way to help balance the books.”

She adds: “It’s not impossible that the chancellor could seek to impose a lifetime cap on ISA saving – perhaps at around £500,000. We could also see a reduction in the annual allowance available for cash ISAs, but an increase in the annual allowance for stocks and shares ISAs in an effort to support economic growth.”