ISA Calculator — Project Tax-Free Growth for Cash, Stocks & Shares, and Lifetime ISAs
An Individual Savings Account (ISA) is the UK government's main tax-free savings and investment wrapper. Any interest, dividends, or capital gains earned inside an ISA are completely exempt from income tax and Capital Gains Tax — now and when you withdraw. In 2025/26 each UK resident aged 18 or over can shelter up to £20,000 per tax year across all ISA types combined. This calculator projects how much your ISA pot could be worth at the end of any time horizon, using monthly compounding, and shows the full breakdown of contributions vs tax-free growth. Choose Cash ISA, Stocks & Shares ISA, or Lifetime ISA (which adds a 25% government bonus on up to £4,000 per year). Enter your numbers above and the result updates instantly.
| Final ISA Value (tax-free) | £261,982.70 |
| Total Contributions | £120,000.00 |
| Investment Growth (tax-free) | £141,982.70 |
Year-by-year projection:
| Year | Balance | Contributions | Growth |
|---|---|---|---|
| 1 | £6,232 | £6,000 | £232 |
| 2 | £12,915 | £12,000 | £915 |
| 3 | £20,082 | £18,000 | £2,082 |
| 4 | £27,766 | £24,000 | £3,766 |
| 5 | £36,005 | £30,000 | £6,005 |
| 6 | £44,841 | £36,000 | £8,841 |
| 7 | £54,314 | £42,000 | £12,314 |
| 8 | £64,473 | £48,000 | £16,473 |
| 9 | £75,367 | £54,000 | £21,367 |
| 10 | £87,047 | £60,000 | £27,047 |
| 11 | £99,572 | £66,000 | £33,572 |
| 12 | £113,003 | £72,000 | £41,003 |
| 13 | £127,404 | £78,000 | £49,404 |
| 14 | £142,847 | £84,000 | £58,847 |
| 15 | £159,406 | £90,000 | £69,406 |
| 16 | £177,162 | £96,000 | £81,162 |
| 17 | £196,201 | £102,000 | £94,201 |
| 18 | £216,617 | £108,000 | £108,617 |
| 19 | £238,508 | £114,000 | £124,508 |
| 20 | £261,983 | £120,000 | £141,983 |
This calculator provides estimates for informational purposes only and does not constitute financial advice. Consult a qualified financial advisor for decisions based on your individual circumstances.
Types of ISA in 2025/26
There are five types of ISA available in the UK. Each has different allowances, return expectations, and withdrawal rules. Most savers choose between the Cash ISA and the Stocks & Shares ISA.
| ISA Type | Annual Allowance | Typical Return | Withdrawal Rules | Best For |
|---|---|---|---|---|
| Cash ISA | Up to £20,000 total | 4–5% (2025/26 rates) | Anytime (flexible ISA if provider allows) | Short-term savings, emergency fund |
| Stocks & Shares ISA | Up to £20,000 total | ~7% long-run (not guaranteed) | Anytime, but market risk applies | 5–30 year wealth building |
| Lifetime ISA (LISA) | £4,000 (sub-limit of £20k total) | 4–7% + 25% gov bonus | First home (<£450k) or age 60 without penalty | First-time buyers or supplementary retirement saving |
| Junior ISA (JISA) | £9,000 (separate allowance) | 4–7% depending on type | Only at age 18 (locked) | Parents saving for children |
| Innovative Finance ISA | Up to £20,000 total | 6–10% (higher risk) | Depends on underlying loans | Experienced investors comfortable with P2P risk |
The Annual Allowance
For 2025/26, the ISA annual allowance is £20,000. This is the total amount you can subscribe across all your ISAs in a single tax year (6 April to 5 April). The allowance resets each April — unused portions cannot be carried over.
You can split the £20,000 across multiple ISA types in any combination you like. For example, you could put £10,000 into a Cash ISA and £10,000 into a Stocks & Shares ISA, or allocate £4,000 to a Lifetime ISA and the remaining £16,000 to a Stocks & Shares ISA. Since April 2024 the rules were further relaxed: you can now open and subscribe to multiple ISAs of the same type with different providers within the same tax year, as long as the combined total stays within £20,000.
The Junior ISA allowance is £9,000 per child per year and is completely separate — it does not count towards the adult £20,000 allowance.
How Tax-Free Compounding Works
The mathematical engine behind ISA wealth-building is compound interest. Every month, your existing pot earns a return, and that return is then reinvested to earn further returns — with zero tax drag along the way.
The future value formula this calculator uses for monthly contributions is:
FV (lump sum) = PV × (1 + r/12)^(n×12) FV (monthly contributions) = PMT × [((1 + r/12)^(n×12) − 1) / (r/12)] × (1 + r/12) Where: PV = initial lump sum PMT = monthly contribution (£) r = annual growth rate (decimal) n = number of years
The key insight: at a 7% annual rate, £500 per month invested for 20 years grows to approximately £260,000 — of which only £120,000 is money you actually paid in. The remaining £140,000 is pure investment growth, entirely tax-free. Outside an ISA, a higher-rate taxpayer would owe up to 20% Capital Gains Tax on that growth — a saving of up to £28,000 in this example.
Worked Example: £500/month for 20 Years at 7% in a Stocks & Shares ISA
This is the default scenario in the calculator above. Here is the step-by-step maths:
Inputs: Initial lump sum (PV) = £0 Monthly contribution = £500 Annual rate (r) = 7% = 0.07 Duration (n) = 20 years = 240 months Step 1: monthly rate r/12 = 0.07 / 12 = 0.005833... Step 2: growth factor (1 + 0.005833)^240 = 4.0387 (approx) Step 3: annuity factor (end-of-period, annuity due) [((4.0387 − 1) / 0.005833)] × (1 + 0.005833) = [3.0387 / 0.005833] × 1.005833 = 521.05 × 1.005833 = 524.09 Step 4: future value of monthly contributions FV = £500 × 524.09 = £262,045 Total contributions = £500 × 240 = £120,000 Tax-free growth = £262,045 − £120,000 = £142,045 Outside an ISA (40% taxpayer paying 20% CGT): CGT on £142,045 growth ≈ £28,409 (after the £3,000 annual exempt amount) ISA tax saving ≈ £28,400+
This illustrates why the ISA wrapper becomes more valuable the longer you hold it. The bigger your accumulated pot, the more tax you avoid each year.
Lifetime ISA — 25% Government Bonus Explained
The Lifetime ISA is the most generous government savings incentive available in 2025/26, but it has strict conditions. Here are the key rules:
- Eligibility: You must be aged 18–39 to open a LISA. Once open, you can contribute until your 50th birthday.
- Annual cap: Maximum £4,000 of contributions per year (counts towards the £20,000 ISA total allowance).
- Government bonus: 25% of every £1 contributed, paid by HMRC — up to £1,000 bonus per year. Over a full 32-year contribution window (age 18 to 50), that is a maximum of £32,000 of free government money.
- Permitted withdrawals (no penalty): (1) Buying your first home, where the property costs £450,000 or less; or (2) at age 60 or above.
- Unauthorised withdrawal penalty: 25% of the withdrawal amount. Because the bonus is 25% of contributions, this penalty claws back all the bonus and also takes approximately 6.25% of your own money. Use the LISA only for its intended purposes.
- Terminal illness: Penalty-free withdrawal permitted.
Example: You contribute £4,000 in 2025/26. HMRC adds £1,000. Your LISA holds £5,000 growing tax-free. If you withdraw that £5,000 for anything other than a first home or at age 60+, you pay 25% of £5,000 = £1,250, leaving you with only £3,750 — less than your original £4,000 contribution. Always keep LISA funds ring-fenced for their intended purpose.
Cash ISA vs Stocks & Shares ISA
The most common question for new ISA savers is which type to open. The answer depends on time horizon:
| Cash ISA | Stocks & Shares ISA | |
|---|---|---|
| Capital risk | None — your balance cannot fall | Yes — markets can fall and stay low for years |
| FSCS protection | £85,000 per authorised bank | £85,000 per authorised firm (covers firm failure, not investment losses) |
| Typical 2025 rate | 4–5% easy-access; up to 5.5% fixed | ~7% long-run average (not guaranteed) |
| Inflation protection | Moderate — rates above inflation now, may not be in future | Strong — equities have historically outpaced inflation by ~5% per year |
| Best for | 0–3 year time horizon, emergency fund | 5+ year time horizon, long-term wealth building |
A common strategy is to hold three to six months' spending in a Cash ISA as an emergency fund, and invest everything above that in a Stocks & Shares ISA for long-term growth. This way, market volatility does not force you to sell investments at the wrong time.
Note that the 4–5% Cash ISA rates available in 2025/26 are historically high, reflecting elevated Bank of England base rates. As rates fall, Cash ISA returns will decline. Past performance of any savings product is not a guarantee of future returns.
Frequently Asked Questions
What is the ISA annual allowance for 2025/26?
The ISA annual allowance for the 2025/26 tax year (6 April 2025 to 5 April 2026) is £20,000. You can save or invest up to £20,000 across all your ISA accounts in a single tax year. This includes Cash ISAs, Stocks & Shares ISAs, and Innovative Finance ISAs. The Lifetime ISA has its own sub-limit of £4,000 per year, but that £4,000 still counts towards your overall £20,000 total. Unused allowance cannot be carried forward to the following tax year — each year you start with a fresh £20,000 allowance.
Can I open both a Cash ISA and a Stocks & Shares ISA in the same year?
Yes. Since April 2024, the rules were relaxed so that you can subscribe to multiple ISAs of the same type in the same tax year — as long as you do not exceed the £20,000 total annual allowance across all of them. So you could have a Cash ISA with one provider and a Stocks & Shares ISA with another, splitting your £20,000 however you like. The only exception is the Lifetime ISA, of which you may only hold one open subscription at a time.
Who is eligible for a Lifetime ISA?
To open a Lifetime ISA (LISA) you must be aged 18 to 39 (inclusive). Once open, you can continue contributing until your 50th birthday. The government adds a 25% bonus — up to £1,000 per year — on contributions of up to £4,000 per year. You can withdraw penalty-free only to buy your first home (purchase price under £450,000) or from age 60. Any other withdrawal triggers a 25% penalty charge, which effectively returns the government bonus and takes a small slice of your own money, so the LISA is very specifically designed for first-time buyers or retirement savings.
Are ISA withdrawals truly tax-free?
Yes. Interest earned in a Cash ISA, investment gains and dividends in a Stocks & Shares ISA, and all proceeds from a Lifetime ISA (for permitted purposes) are completely free of income tax and Capital Gains Tax, both during the period of saving and when you withdraw. This is unlike a pension, where withdrawals above the 25% tax-free lump sum are taxed as income. There is no reporting requirement to HMRC — you do not need to declare ISA income or gains on a tax return.
What happens if I exceed the £20,000 annual allowance?
If you accidentally subscribe more than £20,000 across your ISAs in a single tax year, HMRC will write to you and the excess will need to be withdrawn. Any interest or gains on the excess amount will be taxable. ISA providers share subscription data with HMRC, so they can identify breaches. To avoid this, keep a running total of your contributions each tax year and make sure all your ISA providers are aware of your other ISA subscriptions — especially if you transfer ISAs mid-year.
Should I choose a Cash ISA or Stocks & Shares ISA?
The right choice depends on your time horizon and risk tolerance. Cash ISAs offer capital protection and FSCS coverage up to £85,000 per bank, making them ideal for money you might need within one to three years. Stocks & Shares ISAs carry market risk — your investment can fall as well as rise — but over longer periods (typically five years or more) have historically delivered higher returns than cash. The long-run average return for a diversified global equity portfolio is often cited at around 7% per year before inflation. For money you will not need for at least five to ten years, a Stocks & Shares ISA has historically outperformed cash. For emergency funds or short-term savings, a Cash ISA is more appropriate.