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Results are estimates for guidance only and do not constitute financial advice. Always check the latest rates at gov.uk and consult a qualified professional.
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How to Use the ISA Calculator
- Enter your initial deposit — lump sum you're starting with.
- Set a monthly contribution — up to £1,666.67/month if you're maxing the £20,000 annual allowance.
- Enter your expected annual return — cash ISAs typically return 3–5%, stocks & shares ISAs have historically averaged 6–8% real terms.
- Set the investment horizon in years — longer horizons benefit much more from compounding.
- Optionally pick a tax band to compare against a taxable account and see how much tax the ISA saves you.
- Click "Calculate" — the tool shows your final balance, total contributed, growth, and a year-by-year breakdown.
What is an ISA?
An ISA (Individual Savings Account) is a UK tax-free wrapper that lets you save or invest up to £20,000 per tax year (2025/26 allowance) without paying income tax on interest, dividend tax on dividends, or capital gains tax on investment growth. Anything inside an ISA grows completely tax-free, and withdrawals are also tax-free. That makes ISAs one of the most valuable long-term tools in UK personal finance.
The £20,000 annual allowance is set per person, not per household. A couple can contribute £40,000 between them each year. Unused allowance doesn't carry forward — if you don't use it in a tax year, it's lost. The tax year runs 6 April to 5 April, so the deadline to use each year's allowance is midnight on 5 April.
The four main ISA types
Cash ISA — a savings account with tax-free interest. Safest option, protected by the FSCS up to £85,000 per institution. 2025 rates are typically 4.0–4.8% AER on easy-access Cash ISAs, higher on fixed-term. Suitable for short-term savings (house deposit, emergency fund, wedding).
Stocks & Shares ISA — holds investments (shares, funds, ETFs, bonds). Tax-free dividend and capital gains. Higher potential return (historical UK equity average ~7% real) but with market risk and capital at risk. Suitable for long-term investing (10+ year horizon).
Lifetime ISA (LISA) — for under-40s buying a first home or saving for retirement. Contribute up to £4,000/year (within the £20,000 total), and the government adds a 25% bonus — £1,000/year maximum. Withdraw only for a first home (up to £450,000) or after age 60; other withdrawals incur a 25% penalty that effectively claws back the bonus and takes a bit extra. Powerful tool if you meet the use case.
Junior ISA (JISA) — for children under 18. £9,000 annual allowance (separate from the adult £20,000). Locked until the child turns 18, at which point it rolls into an adult ISA. Can be Cash or Stocks & Shares.
Cash ISA vs Stocks & Shares ISA
The choice comes down to time horizon and risk tolerance. For money you'll need in 1–5 years (house deposit, upcoming expense), Cash ISA wins — the return is predictable and the capital is protected. For money you won't touch for 10+ years (retirement, long-term wealth), Stocks & Shares ISA usually wins because equity returns have historically outpaced cash by 3–5 percentage points per year over long horizons, and compound growth on that gap is enormous.
On a £20,000 initial + £500/month over 20 years: at 4.5% (Cash ISA), you end up with about £230,000. At 7% (Stocks & Shares ISA), about £325,000. The £95,000 difference is entirely the equity risk premium — but it's only realised if you stay invested across market cycles, including the bad years. Behaviour matters more than the product.
The ISA allowance and how to maximise it
The £20,000 allowance can be split across multiple ISA types in the same tax year — e.g. £8,000 Stocks & Shares + £12,000 Cash ISA, or £4,000 LISA + £16,000 Stocks & Shares. From April 2024, you can hold more than one ISA of each type at the same provider or across providers within a tax year, so you don't need to transfer every time you switch. Transfers between providers don't count as using your allowance, so you can move an old ISA into a new one without affecting that year's £20,000 limit.
If you're saving for a first home and are 18-39, the LISA's 25% bonus often beats the ISA maths alone. £4,000 per year = £1,000 bonus = £5,000 in the LISA. Over five years that's £25,000 contributions + £5,000 bonuses + investment growth, which can cover most of a UK first-home deposit.
ISA vs taxable account: the tax saving
Outside an ISA, investment returns face several tax layers. Interest on cash is taxed at your marginal rate (20/40/45%) above the £1,000/£500/£0 Personal Savings Allowance. Dividends are taxed at 8.75/33.75/39.35% above the £500 dividend allowance. Capital gains face CGT at 10/20% (18/24% for residential property) above the £3,000 annual CGT exemption (2024/25, frozen in 2025/26).
For a higher-rate taxpayer holding a dividend-paying stocks & shares portfolio: outside an ISA, dividends face 33.75% tax and capital gains face 20% CGT. Inside an ISA, both are zero. On a £100,000 portfolio paying 3% dividends, that's £1,012 per year of saved dividend tax alone — compounded over 20 years at 7%, the ISA wrapper is worth about £44,000 in avoided tax on that single portfolio.
ISA transfers and flexible ISAs
ISA transfers move money from one provider to another without using your annual allowance. Always use the provider-initiated transfer process — withdrawing and re-depositing counts as new subscription, potentially exceeding your annual limit. Cash-to-Cash transfers are usually quick; Cash-to-Stocks or Stocks-to-Stocks can take a few weeks. Current-year subscriptions must transfer in full; prior-year subscriptions can be partial.
Flexible ISAs let you withdraw and re-deposit money within the same tax year without affecting your allowance. If your Cash ISA is flexible and you withdraw £5,000 in June, you can re-deposit that £5,000 before 5 April without it counting against the £20,000 limit. Stocks & Shares ISAs can also be flexible but most aren't — check your provider before assuming.
What is the ISA allowance for 2025/26?
The UK ISA allowance for 2025/26 is £20,000 per person per tax year. Of this, up to £4,000 can go into a Lifetime ISA. The allowance is frozen through 2025/26 and is not expected to change before April 2026. Junior ISAs for under-18s have a separate £9,000 allowance.
Can I have more than one ISA?
Yes. From April 2024, you can subscribe to multiple ISAs of the same type in the same tax year (e.g. two Cash ISAs at different providers). The £20,000 total allowance still applies across all of them combined. The exception is Lifetime ISAs — you can only pay into one LISA per tax year.
Is a Cash ISA or Stocks & Shares ISA better?
Cash ISAs are better for money you need within 1-5 years (safe, predictable, FSCS-protected to £85,000). Stocks & Shares ISAs are better for long-term wealth (10+ years) because equity returns typically beat cash by 3-5% per year over long horizons, and that gap compounds significantly. Most UK savers should use both: Cash ISA for short-term goals, Stocks & Shares ISA for retirement.
What is a Lifetime ISA (LISA)?
A Lifetime ISA is for UK residents aged 18-39 saving for a first home (up to £450,000) or retirement. You can contribute up to £4,000 per year (within the £20,000 total ISA allowance), and the government adds a 25% bonus — up to £1,000/year. Withdrawals are tax-free for a first home or after age 60. Other withdrawals incur a 25% penalty that exceeds the bonus, so effectively you lose money.
What happens if I contribute more than £20,000 in a tax year?
HMRC will flag the over-subscription. The excess amount loses its ISA status — so it no longer benefits from tax-free growth, and interest/dividends/gains on that portion become taxable. HMRC typically contacts you to request removal of the excess. No financial penalty beyond losing the tax shelter on the overage.
Can I transfer ISAs between providers?
Yes, and it does not use your annual allowance. Always use the provider-initiated transfer process — never withdraw and re-deposit, because that would count as a new subscription. Cash-to-Cash ISA transfers typically complete in 15 working days; Cash-to-Stocks or Stocks-to-Stocks can take 30 days. Current-year subscriptions must transfer in full; prior-year money can be partial.
Do I pay tax when I withdraw from an ISA?
No. ISA withdrawals are completely tax-free — no income tax, no dividend tax, no capital gains tax. That's the core benefit of the ISA wrapper. Some ISAs (Fixed-rate Cash ISAs, LISAs) have withdrawal restrictions or penalties, but those are product-level restrictions not tax charges.
How much tax does an ISA save me?
It depends on your tax band, investment return, and portfolio type. A higher-rate taxpayer holding a £50,000 dividend-paying portfolio at 4% dividend yield saves about £675/year in dividend tax alone, plus 20% CGT on any gains realised. Over 20 years at 7% compound growth, the ISA wrapper is typically worth £20,000-£50,000+ in avoided tax on a £100,000 portfolio.
