In recent years, Isas have seen a surge in popularity, becoming an essential tool in personal finance management. These tax-free accounts, alongside private pensions, are foundational for building a robust financial future.

As both investors and savers face increased taxation on their returns, the ability to save or invest up to £20,000 in a tax-free environment is becoming ever more important for wealth accumulation. Recent data underscores this point emphatically.

For the first time, the total amount of money held in Isas is expected to have surpassed the £1 trillion mark. This milestone demonstrates that a significant number of Britons have become savvy financial planners and dedicated long-term wealth builders. The Isa continues to be one of the most successful financial products ever introduced.

According to AJ Bell’s analysis of HMRC figures covering up to the 2023/24 tax year, nearly £900 billion was reported to be held in Isas. It is highly probable that this figure has since grown, pushing the total over the £1 trillion threshold. This is an impressive achievement, and it seems the Chancellor has taken note of this significant financial development.

AJ Bell analysis of HMRC figures that run until the 2023/24 tax year, show almost £900billion was held in Isas.

It is highly likely that since then the figure has grown and we’ve ticked over the £1trillion mark. An impressive sum – and clearly the Chancellor has wised up to this.

Full use: Analysis of HMRC data show 2.5m savers use the full tax-free limit of £20,000

It’s part of the reason why cash Isas will become less generous from April 2027, when under 65s will have a smaller £12,000 allowance, compared to £20,000 for this tax year and next.

The total value of cash Isas though is dwarfed by their stocks and shares counterparts. There was £360billion in cash Isas at last count, versus £511billion in stocks and shares.

What this shows is most Isa wealth is invested for the long-term, with the total value of investments more than doubling in a decade from £240billion in April 2014 to beyond the half a trillion-figure above.

The typical Isa investor tucks away £7,594 annually into stocks and shares.

Investors are increasingly wise to how important this is, as in recent years capital gains tax rates on profits have been hiked, while tax-free annual allowances for CGT and dividends have been slashed.

The data also reveals 2.5million people used the full £20,000 allowance, 20million adults have an Isa and the average amount held is £34,000.

Broken down by age, for those who have Isas, over 65s typically have the most with £64,386 in them. As you’d expect, there is then a sliding scale downwards.

Those aged 55-64 on average have £41,311; 45-54-year-oldshold £25,316; 35-44-year-olds have £14,254; and those aged 25-34 have £10,556.

But at the pinnacle of the trillion-pound mountain are the true quiet tax-free magicians – the Isa millionaires. This takes me on to the second nugget of data.

A Freedom of Information request by Rathbones shows the number of Isa millionaires has reached 5,070.

This is Money has spoken to two of them in recent years – Ollie Perry who reached Isa millionaire status aged just 36 and Lord Lee, who is believed to be the first to ever achieve it.

The Rathbones data drills down further into this: 95 per cent of Isa millionaires have between £1million and £2million, but 50 individuals have £4million or more.

The biggest snag with this data is that it only takes us up to April 2023. It’s hard to put a precise figure on, but it’s more than likely the number of Isa millionaires could be double what’s quoted above. 

Investment returns have been good over the past two years and will have dragged many in the £800,000 to £999,999 band over the £1million mark.

These savers have utilised this brilliant financial tool – harnessing every inch of its power – and are reaping the rewards.

Rathbones says someone investing the average annual stocks and shares Isa contribution of £7,594 per year would take around 41 years to reach a £1million pot at a 5 per cent return.

At a higher 7 per cent return, which is entirely feasible, it would take 34 years.

The wealth management firm also says raising average contributions of £7,594 by 2 per cent each year, in line with pay increases, reduces the timeline based on 5 per cent returns to 36 years and 31 years at a 7 per cent return.

It all might seem like a distant dream, but as Angela Smith, from Rathbones, says: ‘Many Isa millionaires didn’t sprint their way there – most started out with Personal Equity Plans (Peps) long before Isas existed.

‘They built good habits, avoided common pitfalls, and let time and discipline do the heavy lifting.’

These are powerful words that should resonate with anyone looking to build wealth for the future. Time flies, compound interest compounds.

She goes on to add: ‘The not-so-secret ingredient to building a large Isa isn’t perfect timing or extraordinary risk-taking, but patience, time, and iron-clad discipline to keep investing and resist the temptation or tinker unnecessarily.’

Her tips to become an Isa millionaire? Start early, use pay rises as built-in boosts, don’t interrupt compounding, use as much of your limit as possible, invest early in the tax year and choosing investments that match your risk profile and goals.

The above is sage advice – and I’d much rather beat the drum of encouraging people to invest long-term, rather than go down the Rachel Reeves route of trying to force people into it.

More encouragement, and hard data to argue the case, less mollycoddling and tinkering. There are a trillion reasons why Isas are working for aspirational Britons.

> The best stocks and shares Isas: Our review of the top platforms to invest

Are you an Isa millionaire? Let me know your story: editor@thisismoney.co.uk