ISA Calculator — Tax-Free Savings Growth

ISAs shelter savings and investments from all UK income tax and capital gains tax. The annual ISA allowance is £20,000 per tax year, which can be split across Cash ISAs, Stocks and Shares ISAs, Innovative Finance ISAs and Lifetime ISAs in any combination. Once invested, all interest, dividends and capital gains within the ISA wrapper are completely tax-free, with no reporting requirement to HMRC. The whole £20,000 can go into one type or be spread across several, and since the 2024 reforms you can pay into more than one Cash ISA in the same tax year. From 6 April 2027 savers under 65 can put no more than £12,000 of the £20,000 into cash ISAs. Unused allowance cannot be carried forward, so anything left unused at midnight on 5 April is lost for good.

Cash ISA projections use the stated AER (Annual Equivalent Rate) to calculate growth. A fixed-rate Cash ISA locks your money away for 1-5 years at a guaranteed rate, while easy-access ISAs offer flexibility but typically lower rates, with 3-5% AER on offer in 2026. The calculation compounds interest annually or monthly depending on the product. For a £20,000 deposit at 4.5% AER over 5 years with annual compounding, the balance reaches £24,924. Because the capital is protected, a Cash ISA suits short-term goals of under 5 years, where a market fall at the wrong moment would do real damage.

Stocks and Shares ISA projections use assumed growth rates, since returns are variable. Historical UK equity returns have averaged approximately 7-8% nominal (4-5% real) over the long term, but with significant year-to-year volatility, which is why they suit horizons of 10+ years rather than money you will need soon. The calculator models growth at multiple assumed rates and shows the spread of outcomes. Platform fees (0.15-0.45%) and fund charges (0.1-1.5%) reduce the effective return and are deducted in the projection. A common mistake is cash drag, where new contributions sit uninvested inside a Stocks and Shares ISA for months, so aim to invest each contribution within 6-12 months. Innovative Finance ISAs hold peer-to-peer loans instead, which are riskier but have yielded 5-10%.

The Lifetime ISA has its own cap of £4,000 a year, and that amount counts towards the overall £20,000. You can open one between the ages of 18 and 39, and the government adds a 25% bonus on contributions, worth up to £1,000 a year. Withdrawals are tax-free either for a first home purchase of up to £450,000 or after age 60 for retirement. Take the money out for any other reason and a 25% penalty applies, which recovers the bonus and takes a slice of your own contribution as well. It is best suited to under-40s saving for a first home who also want a retirement boost on the side.

Paying in more than £20,000 in a single tax year is usually caught before it causes trouble. HMRC does not generally claim the excess back automatically; your ISA provider should reject the surplus or refund it. If an excess does slip through, HMRC can repair the position retrospectively by treating the surplus as taxable savings held outside the ISA wrapper. You can keep track of your subscriptions through the gov.uk Personal Tax Account. If you have genuinely exceeded the limit by mistake, contact your provider, as minor accidental breaches are usually forgiven on the first occurrence.