How to become an ISA multi-millionaire

Making your first ISA million may be tricky but it gets easier if you want to become a multi-millionaire investor

Many investors dream of reaching ISA millionaire status but what do you do once you reach that milestone?

There are just six weeks left until the end of the tax year and many investors will be looking to find the best stocks and shares ISAs to make use of their tax-free savings allowances.

Research by InvestEngine, based on a freedom of information request to HMRC, shows the number of ISA millionaires in the UK has surged to 4,850 - a near 1,000 percent increase since 2016 when there were only 450.

InvestEngine's head of investments, Andrew Prosser, believes there will be more ISA millionaires in the future.

It comes in spite of conjecture regarding cash ISAs' future.

Twenty-five years after their inception, ISAs remain an essential tool for many people looking to increase their wealth over time, according to Prosser. With the sharp rise in ISA millionaires and now multi-millionaires, we are witnessing that strategy paying off.

We are certain that individuals who have achieved millionaire status have made tax-free stock market investments through their ISAs, considering the relatively limited long-term potential of cash ISAs, even for those who have maxed their accounts since their creation and received favorable interest rates.

In terms of building long-term wealth, the results serve as a reminder of the benefits of investing early and regularly in a diversified portfolio, which is why more people ought to think about investing as a means of achieving their financial objectives.

The Association of Investment Companies recently released data that showed which investment trusts have produced ISA millionaires by continuously using investors' 20,000 annual allowance for 25 years.

The good news for ISA millionaires is that earning your second million won't take as long.

How to earn a multimillionaire ISA.

According to AJ Bell's research, if you put £1,433 a month into an ISA for stocks and shares and saw 6% annual growth, you would become a millionaire in 25 years.

However, because of compound interest, which automatically reinvests your returns on top of your initial contributions, it only takes an additional ten years to reach the £2 million milestone. Because of this, it is 2.5 times simpler to make your second million dollars tax-free.

The platform's analysis indicates that you will need to save 1,433 per month, or 429,900, in total, to go from having nothing to having one million dollars in 25 years.

However, if you were to save the same amount each month, you would only need to save 171,960 to go from 1 million to 2 million. The study found that if you saved for ten years, you would receive 859,189 in growth.

It would only take six more years of saving £1,433 a month to reach your third million.

With 874,067 accruing in fund growth, you would only need to contribute 103,176 in savings during this time. That equates to 41 years of saving £1,433 a month to reach £3 million.

"Building up a million-pound ISA is no walk in the park, but once you get there, hitting new milestones becomes increasingly easy because you have a huge tailwind from growth on the money you've already stashed away," stated Laith Khalaf, head of investment analysis at AJ Bell.

"Fortunately, the benefits of compound growth are not limited to people who have saved over a million pounds; the same principle applies regardless of monthly savings amount.

In the long run, compound interest will help all investors, so it's obviously not just for the wealthy.

Also, it's never too late to begin.

According to Hargreaves Lansdown, its ISA millionaires are 72 years old on average. You can therefore begin saving money now and still have time to become a millionaire even if you are in your 40s or 50s.

The investment platform reported that some centenarians have achieved millionaire status and that investors are still contributing money after the age of 100.

It's the ultimate get rich slow success story, according to Sarah Coles, head of personal finance at Hargreaves Lansdown. Investors carefully and gradually build their portfolios, ensuring they have enough money to support them comfortably in retirement.