Itâs a funny number, ÂŁ1m.
It holds so much cultural significance for us we made a TV show out of it.
Maybe thatâs because itâs the smallest amount of money you need to be rich in our collective eyes. After all, itâs the first amount we add â-aireâ to. Thousandaires arenât all that impressive in the UK, but an ISA millionaire, thatâs a different story.
So maybe thatâs why it stands as a financial goal for many people. A symbol of what hard work can get you and a level at which you can feel youâve done well.
But what if you could get to the seven-figure sum, not by being a business tycoon or personal finance analyst, but by being a steady and ardent saver?Â
How to become an ISA millionaire
Normally when it comes to describing the maths to hit millionaire status in your Individual Savings Account (ISA), the eye-rolling starts.
The figures the financial industry trot out adopt some variant of âJust save the maximum ÂŁ20,000 annual allowance into your tax-efficient ISA from the age of 18 and youâll get there.âÂ
Nauseating and tone deaf for the most part.
So, is it actually possible to become an ISA millionaire without generating crazy annual growth through investment returns or having huge wads of cash to start off with?
Yes and no, is the honest answer.
Weâve run the numbers and the maths stacks up but there are a lot of assumptions we have to make to get to the magical million.Â
Weâve put them below. You might think some are well within your grasp and others seem out of touch with what the average Briton could realistically earn or afford to put into their ISA.Â
And youâre probably right to scoff at certain aspects but the ISA maths doesnât lie. Ultimately, it wonât be achievable for everyone because our earning potential and ability to save can swing wildly throughout our lives (and likely has done over lockdown).
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Median annual earnings for full-time employees in the UK, 2010-2021

But remember, that lovely round ÂŁ1,000,000 figure is actually a fairly arbitrary number.Â
Using it as a goal works because we tend to see it as a significant milestone. But really the message to take away from all of this is how consistent investing and using time to compound quite a reasonable level of return can amplify your financial position.
That said, letâs look at the numbers. The salary figures below arenât the most important part, as weâre looking at what you could invest, but weâve used them to give an idea of how our potential savings rise as our earnings do too.
ISA millionaire investment strategy
- You start off earning ÂŁ25,000 at 25 years old, investing ÂŁ2,500 each year until youâre 30, achieving 5% returns, compounded once per year.
- At 30 you start to earn ÂŁ30,000, just short of the national average. In your 30s you get yearly pay rises of 3%, just ahead of the Bank of Englandâs target inflation rate of 2%, and invest ÂŁ5,000 each year.
- At 40, your pay goes up to ÂŁ45,000. You keep getting yearly pay rises of 3% and put away ÂŁ10,000 each year in your 40s.
- At 50, you start to earn ÂŁ65,000, continue getting 3% pay rises and save ÂŁ20,000 each year in your 50s.
- At 60, you start to earn ÂŁ90,000 and receive 3% yearly pay rises until you retire at 65. You save ÂŁ20,000 each year from 60 to 65.
- Taking into account a ÂŁ3 monthly ISA fee, by retirement age, your total contributions of ÂŁ461,060 have been able to snowball into a sum of ÂŁ1,026,766.
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Who wants to be an ISA millionaire? Well... everyone.
Initially, a few questions come to mind.
Where am I living during all of this? What about my pension, shouldnât I be putting money into it too? How do I choose between an ISA and a SIPP (self-invested personal pension)?Â
Should I really be stock trading in line with those earnings at those ages?
And they are completely fair things to wonder.
A ÂŁ90k salary would also put you among the countryâs top earners, which wonât be where most of us end up. But the figures at the lower end might actually look quite reasonable, using the UKâs average earnings figures as a yardstick.
So possible, yes. Probable, less so. That doesnât mean it canât remain a goal. And maybe seeing it written down in black and white can serve as a bit of scaffolding.Â
It might help you structure how you think about hitting your financial goals, no matter how many zeros they have on the end of them.
The focus should really be the bigger picture here. Just look at what a consistent approach to investing over the long term, and letting time do the work, can achieve.
If youâre able to start earlier, or save more than ÂŁ208.33 per month in your 20s, or ÂŁ416.67 in your 30s it can really shave off the sums youâd have to save later down the line. Thatâs thanks to the time youâll have on hand to compound your money.
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đ§ź Use our ISA calculator to estimate how much your ISA investments might be worth in the future.
Stocks and shares ISA dividends
So while weâre talking compounding, letâs talk dividends.
Theyâre the bedrock of all long-term stock market investing and, if youâre aiming to become an ISA millionaire, theyâll likely be a key part of your journey.
So, letâs start with âwhat is a dividend?â
Itâs a regular payout from a company to its shareholders as a thank you for being there, and also to keep investors sweet and invested.
The payment amount depends on the earnings that company makes.
So, rather than getting doe-eyed at headline dividend percentages, we need to make sure those earnings are strong and consistent enough to keep our dividends flowing.
In short, a companyâs ability to pay a dividend matters more than the dividend itself.
Start by looking past the top line figure, to the dividend cover.
Is the firm actually going to be able to pay you that figure, and sustainably, or are you being hypnotised by the big number when the rest of the business is collapsing?
With a lot of dividends starting to reappear after hibernating during lockdown, it's also important to keep tabs on a company's share price.
Income payments might resume but if the share price stumbles across the bottom of the page it's not going to make your portfolio any happier.
Back to dividend cover. You'll likely see it expressed as holding â2xâ or â3xâ the level needed to meet the next dividend.
Looking at the levels of cash on the balance sheet can help sort the leaders from the basket cases too.
Quite often the top dividend stocks of the moment stop being so good after that.
That 5% weâre aiming for can be made up of growing dividends and a rising share price too.
So remember to factor both into your strategy.
Why should I use my ISA for income?
Something the growth side of the ISA millionaire story can miss is the benefit of using an ISA after the accumulation phase is complete - whether youâve hit the ÂŁ1m mark or not.
We normally associate taking an income from our investments with retirement, and tapping into that pension pot.
While those long-term savings are clearly geared towards letting you do just that (currently you canât access your pension until youâre 55) planning to take an income from your investments doesnât have to be confined to your retirement savings.Â
Using an ISA has the benefit of not requiring you to pay tax when you take your money out of it - something you have to consider when you take money from your pension later in life.Â
Of course there are things like company contributions and tax relief you get with a pension so theyâre definitely not to be overlooked.
But what if your plan is to wind down in work before the age of 55, or before the state pension kicks in around the age of 68?
You might have plans to go part-time or just take on the projects you want. Income from your ISA could help supplement your pay until you can access your pension savings.
So, given that growing those dividends and aiming for that 5% compound growth (or higher) is the goal, what assets are out there to help?
ISA millionaire investment portfolio
Itâs up to you what to put in your investment portfolio but there are US and UK stocks, and investment trusts (aka investment companies), with a strong commitment to growing their dividends as well as aiming for capital growth at the same time.
The long-term average dividend yield of the UK stock market sits at around 4-5%. If you find consistency around or above that level but not so far as to leave you wondering how sustainable it really is, youâre on the right track.Â
Remember, investment returns, and annual growth in general, should be a blend of capital growth and income. A balanced portfolio will have elements of both, so that your investment goals donât depend on just one corporate strategy or dividend policy.
That means youâll probably end up with a range of sectors and geographies naturally.Â
Popular stocks in the UK might be some blue chip companies in the consumer staples sector, big pharma and even the likes of British American Tobacco (BAT) or Shell (the artist formerly known as Royal Dutch Shell). These arenât recommendations, just a few firms aiming to grow revenues and keep dividend-hunters happy.
You can also have a look at the so-called dividend aristocrats who prize maintaining their dividends over almost everything.
As always though, nothing is guaranteed and the pandemic period has demonstrated that well. The regulator asked UK banks to stop paying dividends and keep that cash in case the nationâs borrowers couldnât pay back their loans and mortgages.
Companies across the board chose to bolster their own cash piles too, in lieu of paying dividends. The important element here is that we need to understand the variability of dividend payments and remember that a firm chopping its own payout down isnât just theory - it very much can be a reality.
Hereâs one we made earlierâŠ
Thankfully, there are exchange-traded funds (ETFs) that keep tabs on dividend-paying stocks for you.
Examples here include the SPDR S&P US Dividend Aristocrats ETF, which tracks the 60 highest-yielding US stocks with 25 consecutive years of growing dividends, and the SPDR S&P UK Dividend Aristocrats ETF, which follows the performance of the best UK dividend stocks.
Have a look at the investment trusts in the dividend hero brigade too. These are investment companies with fund managers at the helm, searching the globe for growth and income opportunities.
A key highlight of investment trusts is their ability to put 15% of their income to one side each year, so they can bolster payments to investors when dividend income suddenly becomes hard to find.
They also have access to private equity and can invest in companies long before they come to the stock market.
Collective investments like these can be useful as a readymade basket of diversified income sources. But make sure you actually look at the fundâs investment objectives, how the fund manager likes to invest and the fund holdings.
If you hold a few of them you might end up holding the same company across various funds. âDividend clumpingâ, as itâs known, actually concentrates your money over just a few individual equities instead of giving you the well-diversified portfolio youâre aiming for.
You might even want to think about looking beyond the obvious dividend-paying diversified trusts and income stocks to the alternative sources of income on the stock market, for diversification.
Itâs important to say that simply investing in these assets isnât a passport to the ISA millionaire club. Thereâs risk involved in all types of investing, and whether youâve got a collection of stocks, ETFs or diversified investment trusts, outcomes are never guaranteed.Â
Before you get into any of it, have a look at our guide on how to trade stocks for beginners.
What is an ISA?

If all of this intrigues you and you havenât quite got to grips with ISAs just yet, hereâs a quick guide.
An ISA is an account you can use to put money away and, with a stocks and shares ISA, invest it for your future.
Itâs not the only type of ISA around though. You might have seen ads for a cash ISA in your high street bank too. As its name suggests, you can only put cash in there meaning you wonât be able to add any company shares to your account.Â
That can be attractive for people who just donât want to take the risk associated with the stock market.
More than a decade of interest rates sitting at record lows has been a nightmare for cash savers though. Even with the interest most cash ISAs offer now, they still canât beat the rate of inflation, meaning youâre pretty much guaranteed to lose out in real terms.Â
Of course, the trade off is that you havenât taken any investment risk so you might not gain as much as in a long-term well-diversified stocks and shares ISA, but you might not lose as much either.
You can currently contribute up to ÂŁ20,000 during the 2022/23 tax year (from April to April).Â
You could opt for an annual contribution at the start or end of the tax year or make regular contributions after payday each month. Ad-hoc contributions are fine too if you get a bit of birthday money to put towards your investment goals.
You can put money in and take it out when you need to but itâs important to remember that if youâre investing you should take a long-term view.
A key thing to understand from the get-go is that the ISA is just the outer shell for you to fill with your investments - itâs not an investment itself.
Thatâs why youâll often hear it described as a âwrapperâ - you get to decide on the filling.
And the reason youâll also hear that one-upped to âtax wrapperâ is because, when you put your investments in an ISA, you donât have to pay tax on any capital gains your investments might achieve.
You can also only open one stocks and shares ISA account with one provider each year.Â
If you find another company whose fees are lower, or whose platform just suits you better, you can either transfer your current one to them, or wait until the new tax year to open a brand new ISA with them. Find out more on how to transfer an ISA.
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To get to grips with ISAs explore some other topics:
- Top 10 ISA stocks and shares at Freetrade
- All you need to know about stocks and shares ISA allowance
- All your ISA questions answered in our stocks and shares ISAÂ rules guide
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