The ISA Millionaire

FinanceWealth-Building

  • Author Sam Gooch
  • Published May 12, 2009
  • Word count 372

Most people have heard of, or have money invested in a cash ISA, but many don't know enough about stocks and shares ISAs to choose this savings method either as part of or all of their ISA allowances.

If you are unfamiliar with ISAs, here's a quick summary. Each year, everyone over the age of 16 is entitled to a tax free savings allowance. The total limit is currently set at £7,200 (although there have been rumours that this will increase) of which a maximum of £3,600 can be invested into a cash ISA, then the remaining amount into a stocks and shares ISA, or the full allowance £7,200 can be used to invest in a stocks and shares ISA.

Any interest earned from cash ISAs, or similarly any returns gained through stocks and shares ISAs is completely tax-free, helping your savings to grow faster.

Although cash ISAs do offer attractive rates, there is more money to be made from investment ISAs. As with all dealings on the stock market, there is an element of risk involved, so you have to do a bit of research into where you choose to invest, and steer clear of shares that are likely to fall.

Many people have now proven that by investing your maximum ISA allowance to create a base for your strategy, you can actually become an ISA millionaire, without having to pay any taxes on your returns.

These Isa millionaires did take around 20 years to build up to this figure – including ISAs predecessors 'personal equity plans' (Peps) which were previously used as a form of tax shelter.

This new breed of ISA millionaires will all give you the same advice, never waste a year's Pep or Isa allowance.

This was of course down to knowledge and luck, as an ISA wrapper allows you to invest in what you want, as opposed to letting a bank invest on your behalf, but this can be half the fun of it. It doesn't take long to see that these people have saved hundreds of thousands that would have otherwise gone straight to the tax-man

Last year, despite the state of the economy, Barclays Stockbrokers produced a number of people lucky enough to become ISA millionaires from their stock selections.

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