By taking full advantage of the tax breaks on offer, could you become an ISA millionaire?
Across the UK, there are a small, but rapidly growing, number of ISA millionaires. After years of saving and investment and taking full advantage of the tax breaks on offer, they have gradually built up their wealth and can now identify as millionaires.
ISAs are mostly popular among investors for their tax benefits. Here in the UK, ISAs act as an savings account that allow you to hold investments free of tax on dividends, interest and capital gains.
Although in previous years ISA investors have seen less generous allowances, research from the Telegraph suggests that Britain now has over 200 ISA millionaires – a figure which they believe could soon reach 2,000 based on a combination of 2017’s annual allowance and the growing ease of managing your own investments.
With the latest increase to the ISA allowance making it realistic for sizeable fortunes to be saved and invested entirely out of the reach of the taxman, could now be the start of a new saving phenomenon?
ISAs were first established in 1999 with a general allowance of £7,000. Currently, the maximum amount you can deposit into an ISA in the 2017/18 year stands at £20,000. There’s also a new type of ISA – the Lifetime ISA – which will provide investors with a 25% boost to its £4,000 annual allowance, in a similar way to the tax relief applied to pensions.
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Although interest rates on the popular cash ISAs are not as high as they have been in the past, an increase in the allowance, and the ability to invest part or all of their allowance enables individuals do grow considerable wealth.
And it’s not just one or two ISA accounts that will help them reach this status. Although you can only open one cash ISA and one stocks and shares ISA each tax year, ISA millionaires across the country have several ISA accounts opened every year over many years.
The elite band of ISA millionaires in the UK are living proof that investing over long period of time pays off. Even during a global financial crisis, Brexit and the shock vote to make Donald Trump president of the US, investing money proved to be beneficial. Not only do ISA funds act as a safety net should things not go to plan, but they could in fact leave you very well off.
Although ISA’s can be straightforward it can be hard to assess the state of the market. The majority of investors in the ISA millionaire band will have sought financial advice from a wealth management company. Investment companies are able to analyse the market and bring to your attention the most frequent trends.
Despite only being able to open one ISA, you are able to transfer your ISA. If you see a better investment option then you can transfer your money as long as you comply to the with the transfer rules.