Calculate Your ISA Growth
Total Contributions
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Investment Growth
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Total ISA Value
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Tax Saved vs Taxable
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| Year | Contribution | Balance |
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What is an ISA?
An Individual Savings Account (ISA) is a UK government-backed tax-free savings and investment wrapper. Any interest, dividends, or capital gains earned inside an ISA are completely tax-free — you pay no income tax, no capital gains tax, and no dividend tax.
- Cash ISA: Works like a savings account with tax-free interest. Low risk, stable returns (typically 3-5% in 2025).
- Stocks & Shares ISA: Invest in funds, shares, bonds, and ETFs. Higher potential returns over the long term (historically 5-8% p.a.), but with short-term volatility.
- Lifetime ISA (LISA): For 18-39 year olds. Save up to £4,000/year with a 25% government bonus (up to £1,000/year). Must be used for first home purchase or retirement (age 60+).
- Innovative Finance ISA: Holds peer-to-peer lending investments. Higher risk, variable returns.
ISA Allowance & Rules 2025/26
| Rule | Detail |
|---|---|
| Annual allowance | £20,000 across all ISA types |
| Lifetime ISA limit | £4,000 (counts toward £20,000 total) |
| Tax year | 6 April 2025 – 5 April 2026 |
| Eligibility | UK resident, 18+ (16+ for Cash ISA) |
| Multiple ISAs | Yes — since April 2024, you can pay into multiple ISAs of the same type |
| Withdrawals | Flexible ISAs let you re-contribute withdrawn amounts same tax year |
| Transfers | You can transfer between ISA providers without losing tax-free status |
Cash ISA vs Stocks & Shares ISA
| Feature | Cash ISA | Stocks & Shares ISA |
|---|---|---|
| Risk | None (FSCS protected up to £85,000) | Market risk — value can go down |
| Typical return | 3-5% (2025 rates) | 5-8% long-term average |
| Best for | Short-term savings (1-3 years) | Long-term investing (5+ years) |
| Tax benefit | No tax on interest | No CGT, no dividend tax, no income tax |
| Access | Usually instant | Takes a few days to sell and withdraw |
Rule of thumb: Use a Cash ISA for money you need within 5 years. Use a Stocks & Shares ISA for long-term goals like retirement or building wealth over decades.
The Power of Tax-Free Compounding
Compare investing £20,000/year for 20 years in an ISA vs a taxable account (assuming 6% returns and 20% higher-rate tax on gains):
| Scenario | ISA (Tax-Free) | Taxable Account |
|---|---|---|
| Total contributions | £400,000 | £400,000 |
| Growth at 6% p.a. | £335,719 | £335,719 (pre-tax) |
| Tax on gains | £0 | ~£67,144 (20% CGT) |
| You keep | £735,719 | £668,575 |
That’s £67,144 more in your pocket tax-free — and even more if you reinvest dividends.
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Frequently Asked Questions
An Individual Savings Account (ISA) is a UK tax wrapper. Any interest, dividends, or capital gains earned in an ISA are completely tax-free. The annual allowance for 2025/26 is £20,000.
The annual ISA allowance is £20,000 for 2025/26. This can be split across Cash ISA, Stocks & Shares ISA, Innovative Finance ISA, and Lifetime ISA (max £4,000 into LISA). The total across all ISAs must not exceed £20,000.
Yes, you can withdraw at any time from Cash ISA or Stocks & Shares ISA. With flexible ISAs, you can re-contribute withdrawn amounts in the same tax year without it counting toward your allowance. Lifetime ISA withdrawals for non-qualifying purposes incur a 25% penalty.
Cash ISAs are best for short-term savings (1-3 years) with no risk. Stocks & Shares ISAs are better for long-term investing (5+ years) where you can ride out market volatility for higher potential returns.
A Lifetime ISA (LISA) is for 18-39 year olds saving for their first home (up to £450,000) or retirement (age 60+). You can save up to £4,000/year and receive a 25% government bonus — up to £1,000 free money each year.
Cash ISAs are protected by the FSCS up to £85,000 per provider. Stocks & Shares ISA investments are held separately from the provider's assets and are also FSCS-protected up to £85,000 if the firm fails.