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The number of people holding more than £1mn in their Isa has risen by more than 50 per cent in a single year, as years of tax-free investment growth have helped swell the ranks of stock-and-shares Isa millionaires.

Around 7,730 Isa investors had more than £1mn in their Isas at the end of April 2024, up from the 5,070 in the previous tax year, according to the latest HM Revenue & Customs data obtained via two separate freedom of information requests.

Charlotte Ransom, chief executive of Netwealth, said Isa millionaires were no longer such a rarity, owing largely to years of tax-free compounding of stock market returns.

The rally in technology shares linked to the AI boom has provided a significant “tailwind” to boost investors’ accounts, said Ruth Bussey, investment manager at Rathbones.

“It’s also important to remember that the bar for joining the Isa millionaire club is rising in real terms. Inflation steadily erodes purchasing power, meaning £1mn in the future won’t stretch as far as it does today,”

Bussey said.In 2016, 450 investors had £1mn in their Isas, according to money app Plum, which submitted one of the FOI requests. In real terms, that amount would have been worth £1.33mn in 2024.

The figures published today show that 320 investors had Isas worth between £2mn and £3mn, 40 had accounts worth £3mn and £4mn, and 60 had more than £4mn.

“When you look at the top 25 averaging £11.9mn, the amount of capital gains and dividend tax those investors have been spared over the years must be enormous. In the last year alone, they have made tax-free gains of more than £600,000.

It really shows the power of the Isa wrapper,” said Will Bryant, director of wealth strategy at Plum.

“These investors didn’t reach millionaires’ row by selling every time things got scary. They’ve sat through financial crises, Covid, rising interest rates and tariff worries, all of it,” Bryant said.

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Murphy Wealth, a financial adviser, calculated that building a £1mn pot would take about 20 years if an investor used the full £20,000 annual allowance and achieved an average annual return of 8 per cent. No Isa millionaires had achieved their status using a cash Isa alone.

Adrian Murphy, chief executive of Murphy Wealth, said the results underlined why more people in the UK needed to consider investing rather than relying on the cash Isas.“If you want to join the Isa millionaire club — or even the growing number of people with more than £2mn in their accounts — you have to build a portfolio of stocks and shares,” he added.

The latest figures come as the annual cash Isa allowance is set to be cut from £20,000 to £12,000 for savers aged under 65 from next April, although the overall Isa allowance will remain at £20,000.

Netwealth’s Ransom added: “If you don’t expect to access your Isa for the medium- to longer-term, investing it in stocks and shares rather than letting it languish in cash will give it far greater potential to grow.”