Are ISAs still worth it? The journey to becoming an ISA millionaire
Making regular contributions to your ISA could add up over time, potentially creating a tax-free portfolio valued at £1 million or more
Making regular contributions to your ISA could add up over time, potentially creating a tax-free portfolio valued at £1 million or more
Investing wisely is a cornerstone of financial success and for those who can afford to maximise their annual ISA allowance, the rewards could be substantial. Here, we explore how an investor could become an ISA millionaire, highlighting the benefits and considerations.
The annual ISA limit of £20,000 may seem low compared to the total value of your portfolio. However, ISAs have many benefits that make them a good choice for a lot of investors.
By consistently contributing the current maximum ISA annual allowance of £20,000 into a stocks and shares ISA, you could benefit from compound growth to build a substantial and tax-efficient portfolio over time. Compounding allows your investments to grow exponentially, as the returns generated each year are reinvested and continue to earn returns themselves. Assuming you contribute £20,000 a year and an annual growth rate of 5%, you could become an ISA millionaire in approximately 25 years.
Having a tax-free portfolio worth over £1 million is highly beneficial for anyone.
Please note, this example is for illustrative purposes only and is not guaranteed. Additionally, this example does not take fees into account. The assumed growth rate is not guaranteed and it could take you longer than 25 years to have a stocks and shares ISA valued at £1 million.
While the potential for tax-free growth is enticing, it's crucial to remember that investments in stocks and shares ISAs are subject to market fluctuations. The value of your investments can go up and down and there is always the risk that you may get back less than you invested. It’s important to view your ISA investments within the context of your overall financial plan and have a clear understanding of the risks involved.
It's important to remember that the government reviews and changes ISA allowance limits from time to time. This means ISA rules along with their tax treatment could be subject to change. Future changes could affect your investment strategy.
Chancellor Rachel Reeves’s documents following the Spring Statement 2025 confirmed that the government is looking into options for reforming the current ISA regime¹. While no immediate changes were announced, the possibility of adjustments highlights that now could be a good time to maximise your ISA contributions. By contributing £20,000 now, you can take full advantage of the current situation before there are potential changes.
Maximising ISA contributions can be a powerful strategy for building substantial, tax-efficient wealth. Some key aspects of successful ISA investing lie in:
Many investors do not have the time or the inclination to manage their wealth and investments effectively. This means that their ISAs may not provide the same level of returns that they could under professional management.
At Evelyn Partners, we provide combined wealth management, where a financial planner and investment manager work together to ensure that your:
By having two specialists working together, you could achieve better outcomes for your ISA as well as your long-term financial plan. A financial planner creates your strategy and structures your assets, potentially including an ISA, and your investment manager will build your portfolio, including those investments held within an ISA.
Investing in ISAs is not just about the numbers. It's about making informed decisions that align with your financial goals and risk tolerance. To find out more about how ISAs can play a role in your financial plan, speak to your usual Evelyn Partners contact or book an appointment online.
¹ FT Adviser, Spring Statement 2025: govt looking at ‘long overdue’ Isa reform, 26 March 2025
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