Investing in a Stocks and Shares ISA is a proven strategy for achieving financial freedom in the long run. There are now thousands of ISA millionaires in the country, with no dividend or capital gains tax to worry about. And that means wealth is able to grow without HMRC sticking its fingers into the pie.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
Even for more modest investors who’ve only recently started their investing journey, ISAs can make an enormous difference. In fact, let’s explore exactly how much money investors could have made with only a £5,000 starting lump sum five years ago.
Calculating ISA wealth potential
Most investors in Britain rely on FTSE 100 index funds to grow their investment portfolios. That’s certainly not a bad way to go about things since it essentially puts the wealth-building process on autopilot, granting instant diversification across the largest listed businesses in Britain.
But what does that mean in terms of money?
Let’s say an investor put £5,000 to work in September 2025. If they had also reinvested all the dividends paid along the way, they would have earned a total return of 83.4%, or roughly 12.9% per year. That’s enough to transform the initial £5,000 into approximately £9,170 with £4,170 of profit entirely tax-free thanks to the Stocks and Shares ISA.
What about stock pickers?
Of course, index funds aren’t the only way to invest in the stock market. Some investors prefer to take matters into their own hands and pick individual companies to buy shares in. This approach to building wealth is a riskier endeavour. But if the right decisions are made, it can lead to enormously superior returns.
That’s definitely the case for anyone who decided to invest in Games Workshop (LSE:GAW) five years ago. The niche Warhammer miniatures manufacturer continues to command enormous pricing power over its growing customer base. And that’s resulted in impressive double-digit growth across both sales and earnings, even during a cost-of-living crisis.
For shareholders, that’s translated into a market-beating 111.5% return over the last five years, or a 16.2% annualised gain. In terms of money, that’s enough to transform the same initial £5,000 into £10,575.
Still worth buying today?
Looking at Games Workshop today, there’s still a lot to like about the business. Sales earnings growth remains strong regardless of the wobbly economic landscape. The flurry of new video games is attracting a wider audience to the world of Warhammer. And the impact of US tariffs on the group’s exports to America doesn’t appear to be anywhere near as severe as most analysts were initially anticipating.
Pairing all this with the upcoming new edition of its flagship Warhammer 40,000 tabletop wargame, and a fully-fledged TV series in early development, it seems there are still ample growth opportunities on the horizon. Of course, these come paired with some notable risks.
Tariffs still create significant operational challenges. After all, the company manufactures all its miniatures in the UK. And while demand has so far remained strong, that could eventually change if consumer spending starts to shift in light of new economic pressures.
There is undoubtedly risk of share price falls. But with a stellar track record of successfully navigating through hostile business environments and plenty of projects in the pipeline, it’s a risk worth considering, in my opinion.
