Number of ISA millionaires hits record high – how you could become one

The number of ISA millionaires has soared to a record high of 5,070, according to official data.

A Freedom of Information (FOI) request by money app Plum reveals the number of ISA millionaires tracked by HMRC jumped almost 5% during the 2022/23 tax year from the 4,850 millionaires recorded on 5 April 2022.

The number of armchair investors sitting on seven-figure ISA pots has increased more than 1,000% in just seven years.

MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

According to HMRC’s figures, the top 25 ISA investors are sitting on pots averaging an eye-watering £11,305,000 – up by £2.425 million (27%) in the space of just 12 months.

Meanwhile, the average ISA millionaire is sitting on a pot of £1,346,000, as at 5 April 2023.

Rajan Lakhani from Plum comments: “The ISA millionaire club just got bigger, with 220 new members joining its ranks, thanks in part to the US-driven AI-gold rush.

“Those at the top of the tree have – in some cases – seen their pots grow by more than £2 million in just 12 months, without a single penny of tax to pay on their gains.”

The figures come just days before chancellor Rachel Reeves’s Autumn Budget, which could contain changes to ISAs. There are rumours that the £20,000 cash ISA limit could be cut – although we won’t know for certain until the Budget is announced on 26 November.

However, it is stocks and shares ISAs, rather than cash ISAs, that have turned investors into ISA millionaires, or in some cases ISA multi-millionaires. Previous figures show that 94% of ISA millionaires reached this milestone by focusing solely on stocks and shares ISAs.

The rise of the ISA millionaire

ISA millionaire numbers have now increased by 1,026% since 2016 when they stood at just 450.

Since ISA millionaire figures were first tracked in 2016, there’s only been one dip recorded during that time, which was in 2020 when markets initially went into a major downturn at the beginning of the Covid pandemic.

Source: Plum. *Millionaire numbers counted by HMRC on 5 April each year

Of the 5,070 ISA millionaires recorded on 5 April 2023, 4,800 investors were sitting on pots valued at between £1 million and £1,999,999, while 200 individuals had pots between £2 million and £2,999,999.

Thirty had ISAs worth £3 million to £3,999,999, and 50 boasted ISA portfolios in excess of £4 million. (The figures are rounded to the nearest 10 in the FOI, and therefore do not add up to 5,070).

Lakhani notes that the flexibility of ISAs have made them “particularly attractive to younger investors, who don’t want to lock their money away until their late 50s, which is the case with pensions”.

In terms of the upcoming Autumn Budget, he adds: “Nobody is expecting changes to the tax-free status of ISAs themselves, or a change to the £20,000 allowance for stocks and shares ISAs.

“However, Reeves is reportedly considering lowering the annual allowance for cash ISAs specifically, a proposal which is dividing public opinion sharply.”

How to become an ISA millionaire

ISA millionaires usually use a stocks and shares ISA and invest their money, rather than keeping it in savings with a cash ISA.

They likely start early, invest consistently, and take some risk to reap greater returns.

Adrian Murphy, chief executive of the financial adviser Murphy Wealth, comments: “If you want to build wealth in a significant way, you have to build a risk-adjusted portfolio of stocks and shares.

“Historically, a balanced portfolio of stocks and shares has delivered far higher returns over most reasonable timeframes [than cash ISAs, which] often fail to beat inflation.”

According to Plum, someone starting from scratch today, maxing out the current £20,000 annual allowance each year into a stocks and shares ISA could expect to reach millionaires’ row in around 22 years, assuming annualised returns of 7% after fees.

Lakhani says the rise of the “Magnificent Seven” (Wall Street’s leading tech stocks including Nvidia) has helped balloon the pots of armchair investors in the UK in recent years.

We look in more detail at the shares, funds and investment trusts that ISA millionaires hold.