ISA Calculator
Calculate your Stocks & Shares ISA or Cash ISA returns. See how your £20,000 annual allowance grows tax-free.
💰ISA Details
Annual ISA allowance: £20,000 (£1,667/month max)
Contributed
£245K
Tax-Free Growth
£373K
Contributions vs Growth
ISA Growth Over Time
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How the ISA Calculator Works
What an ISA Is and Why It's the UK's Best Tax Wrapper
An Individual Savings Account (ISA) is a UK tax-advantaged savings or investment wrapper. Any growth inside an ISA — interest, dividends, or capital gains — is completely free of UK tax. The annual allowance is £20,000 per tax year (April 6 to April 5), and it can be split across different ISA types.
The ISA is a wrapper, not an investment itself. You can hold cash, stocks, ETFs, bonds, or funds inside it. The tax treatment is what makes it valuable: outside an ISA, a higher-rate taxpayer pays 40% on savings interest, 33.75% on dividends, and 20–24% on capital gains. Inside an ISA, all of that is £0.
ISAs have been available since 1999 (as ISAs, replacing PEPs and TESSAs). The £20,000 allowance has been frozen at this level since 2017 and is expected to remain at £20,000 for the foreseeable future.
The Four Types of ISA
**Cash ISA:** A savings account with tax-free interest. Rates are typically 3.5–5%. Best for emergency funds and short-term goals (under 5 years). FSCS-protected up to £85,000 per bank.
**Stocks & Shares ISA:** The workhorse for long-term investing. You invest in stocks, ETFs, or funds with all growth tax-free. Historical returns for a global equity index fund: 8–12% annually. Best for goals 5+ years away.
**Lifetime ISA (LISA):** A specialised ISA for first-time homebuyers or retirement. You can contribute up to £4,000/year, and the government adds a 25% bonus (up to £1,000/year). Withdrawals for other reasons incur a 25% penalty. Available to UK residents aged 18–39.
**Innovative Finance ISA (IFISA):** For peer-to-peer lending and crowdfunded debt. Returns of 5–8% with higher risk (borrower default). Regulated platforms only. A niche product for experienced investors.
ISA vs Pension: The Strategic Question
For UK taxpayers, the ISA vs Pension decision is one of the most consequential. Pensions (SIPP or workplace) give upfront tax relief at your marginal rate — 20%, 40%, or 45%. That's a huge advantage over ISAs, which give no upfront relief.
However, pensions lock your money until age 57 (rising from 55 in 2028), and 75% of withdrawals are taxed as income. ISAs have no access age, no withdrawal tax, and complete flexibility. You can withdraw at 30, 40, or 85, for any reason, with zero tax.
The optimal strategy for most higher-rate taxpayers: (1) Max the workplace pension to get the employer match, (2) Max the £20,000 ISA allowance for flexibility and tax-free growth, (3) Add extra to a SIPP if you want more tax relief. A blend of pension + ISA gives you both upfront relief and post-retirement flexibility.
Step-by-Step Worked Example
Meet Priya, a UK higher-rate taxpayer, who contributes £1,000/month to a Stocks & Shares ISA for 20 years. Assume 8% annual returns.
- 1Monthly contribution: £1,000.
- 2Annual contribution: £12,000 (within the £20,000 limit).
- 3Investment period: 20 years.
- 4Annual return: 8%.
- 5Monthly rate: 0.667%.
- 6Total months: 240.
- 7FV = £1,000 × [((1.00667)^240 − 1) / 0.00667] = £1,000 × 589.02 = £589,020.
- 8Total contributed: £1,000 × 240 = £240,000.
- 9Tax-free growth: £349,020.
Result
Total contributed: £240,000
Total tax-free growth: £349,020
Final ISA value: £589,020
Tax paid on £349,020 growth: £0
If held outside an ISA (higher-rate taxpayer): ~£120,000 in capital gains tax + dividend tax
Effective ISA tax savings over 20 years: ~£120,000
Key Benefits & Use Cases
When to Use This Tool
- ✓Building long-term wealth with complete tax exemption on all growth.
- ✓Saving for a first home using a Lifetime ISA for the 25% government bonus.
- ✓Retirement planning alongside a SIPP or workplace pension for tax diversification.
- ✓Passive income generation — dividends from ISA holdings are tax-free.
- ✓A flexible alternative to pensions with no access age restrictions.
Why It Matters
- →Complete tax exemption — no capital gains tax, no dividend tax, no interest tax.
- →No access age — you can withdraw at any time, for any reason.
- →Full investment choice (stocks, ETFs, funds, bonds).
- →No lifetime cap on ISA value — grow it as large as you can.
- →Annual allowance of £20,000 — generous compared to most countries.
- →Inheritance tax planning — ISAs held in AIM stocks may qualify for BPR.
Who Should Use This Calculator
- ★UK residents looking for tax-efficient savings or investment vehicles.
- ★Higher-rate and additional-rate taxpayers wanting to avoid punitive tax on investment growth.
- ★Anyone saving for goals 5+ years away who wants tax-free growth.
- ★Pension savers wanting a flexible complement to locked-in retirement accounts.
Tax-Free Returns
All gains, dividends, and interest inside an ISA are completely tax-free.
S&S vs Cash ISA
Compare Stocks & Shares ISA returns vs Cash ISA with different rates.
UK Specific
Uses the £20,000 annual ISA allowance for accurate UK projections.
How to Use
Choose ISA Type
Select Stocks & Shares ISA or Cash ISA.
Set Contribution
Enter monthly amount (max £1,667/month = £20K/year).
Set Return Rate
Typical: 6-10% for S&S ISA, 3-5% for Cash ISA.
View Growth
See tax-free ISA value and growth breakdown.
The Formula
FV = PV(1+r)^n + PMT × [((1+r)^n - 1) / r]Frequently Asked Questions
What is an ISA?
An ISA (Individual Savings Account) is a UK tax wrapper that allows you to save or invest up to £20,000 per year completely tax-free. No tax on interest, dividends, or capital gains. Available in Cash, Stocks & Shares, Lifetime, and Innovative Finance variants.
What is the 2026 ISA allowance?
The annual ISA allowance is £20,000 per tax year (April 6 to April 5). You can split this across different ISA types (Cash, S&S, Innovative Finance, Lifetime ISA for the first £4,000), but the total cannot exceed £20,000.
Cash ISA vs Stocks & Shares ISA?
Cash ISAs offer guaranteed but lower returns (3–5%). Stocks & Shares ISAs invest in the market for potentially higher returns (8–12% historical) but with more risk. For long-term (5+ years), S&S ISAs typically perform better.
Can I withdraw from my ISA?
Yes — you can withdraw anytime. With a 'Flexible ISA,' you can replace withdrawn money in the same tax year without it counting towards your £20,000 allowance. Not all providers offer flexible ISAs — check before relying on this feature.
Should I max out my ISA?
Yes, if you can afford it. £20,000/year at 8% for 20 years = over £915,000 tax-free. The ISA is the single best tax shelter for UK investors. Priority: cash emergency fund → S&S ISA → extra pension contributions.
What is a Lifetime ISA (LISA)?
A LISA gives you a 25% government bonus on contributions up to £4,000/year (max £1,000/year bonus). It's for a first home (up to £450,000) or retirement at 60+. Withdrawals for other reasons incur a 25% penalty. Available to UK residents aged 18–39.
ISA vs Pension — which is better?
Both are essential. Pensions give upfront tax relief (20–45%), making them very efficient, but lock money until 57. ISAs give no upfront relief but complete flexibility with no access age. Best strategy: employer pension match first, then ISA, then extra pension contributions.
Can I transfer an old ISA to a new provider?
Yes — ISA transfers are free of tax and don't count against your annual allowance. Transferring to a lower-cost provider (Vanguard, InvestEngine) can save 0.5–1% per year in fees, compounding into thousands over decades.
How does the ISA interact with my tax-free allowance?
ISA income is entirely separate from your personal allowance and other tax thresholds. It doesn't count as income for tax purposes, so it can't push you into a higher bracket or trigger the personal allowance taper (£100,000–£125,140).
Reviewed by AutoWealthLab Editorial Team
This calculator and its accompanying guide are maintained by the AutoWealthLab editorial team. Every formula is verified against standard financial references, and results are cross-checked with independent calculators before publishing. Our tools are updated whenever tax rules, interest rate benchmarks, or regulatory formulas change.
Last reviewed: October 2026 · Methodology: Standard amortization and compound interest models · Learn more about our testing process