The ISA millionaire

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Most people know about the £3,600 yearly cash ISA allowance, but you may not know you can also invest a further £3,600 into an investment/stocks & shares ISA and pay no tax on your returns.

If you don't know much about ISAs, here's some helpul information. Each year, everyone over the age of 16 is entitled to a tax free savings allowance. Each year, everyone over the age of 16 is given a limit of £7,200 in which they can either: deposit a up to £3,600 into a cash ISA with the opportunity to put the remaining £3,600 into an investment ISA; The full £7,200 into an investment ISA, or a combination of the two.

All returns earned from ISAs, whether it be through interest from cash ISAs, or dividends from investment ISAs, is completely tax free.

Cash ISAs usually offer savers attractive rates of interest, but if you don't mind involving an element of risk to give you the potential to earn some great returns, you may want to consider 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.

Investing your full yearly ISA allowance in the right places could prove to be an extremely profitable savings strategy, as several investors have proven through becoming millionaires simply by making use of their yearly ISA allowance and investing in the right places.

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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