ISA Calculator

£
£
%
years

Total Value Incl. Interest

£6,727.50

Total Contributions

 £1,000.00

Total Interest

 £5,727.50

Return on Investment

572.75%

View table of the annual breakdown

YearContributionsPeriod InterestAccrued InterestTotal Value
0£1,000.00£0.00£0.00£1,000.00
1£1,000.00£100.00£100.00£1,100.00
2£1,000.00£110.00£210.00£1,210.00
3£1,000.00£121.00£331.00£1,331.00
4£1,000.00£133.10£464.10£1,464.10
5£1,000.00£146.41£610.51£1,610.51
6£1,000.00£161.05£771.56£1,771.56
7£1,000.00£177.16£948.72£1,948.72
8£1,000.00£194.87£1,143.59£2,143.59
9£1,000.00£214.36£1,357.95£2,357.95
10£1,000.00£235.79£1,593.74£2,593.74
11£1,000.00£259.37£1,853.12£2,853.12
12£1,000.00£285.31£2,138.43£3,138.43
13£1,000.00£313.84£2,452.27£3,452.27
14£1,000.00£345.23£2,797.50£3,797.50
15£1,000.00£379.75£3,177.25£4,177.25
16£1,000.00£417.72£3,594.97£4,594.97
17£1,000.00£459.50£4,054.47£5,054.47
18£1,000.00£505.45£4,559.92£5,559.92
19£1,000.00£555.99£5,115.91£6,115.91
20£1,000.00£611.59£5,727.50£6,727.50
Photo of calculator author Wes NolteCreated by Wes Nolte.Last updated Nov 8, 2024.

What is an ISA?

An Individual Savings Account (ISA) is a tax-free savings or investment account available to UK residents. Any interest, dividends, or capital gains earned within an ISA are free from tax, making it an attractive option for individuals seeking to maximize their returns.

Benefits of an ISA

  • Tax-free returns: No income tax on interest or dividends, and no capital gains tax.
  • Wide range of options: Choose from Cash ISAs, Stocks and Shares ISAs, Lifetime ISAs, and Innovative Finance ISAs.
  • Annual contribution limits: The government imposes an annual limit on how much can be contributed across an individuals ISA holdings.

Drawbacks of an ISA

  • Contribution limits: Annual caps may limit the amount you can save tax-free.
  • Investment risk: For Stocks and Shares ISAs, the value of investments can go down as well as up.

Types of ISAs

  • Cash ISA: A simple savings account with tax-free interest. Best for those who want no risk on their savings.
  • Stocks and Shares ISA: Allows you to invest in stocks, bonds, or funds. Offers the potential for higher returns but comes with investment risks.
  • Lifetime ISA (LISA): Designed for first-time homebuyers or retirement savings. Contributions up to £4,000 per year are topped up by 25% from the government.
  • Innovative Finance ISA: Enables tax-free investing in peer-to-peer lending. Higher returns are possible but at greater risk.

When Should You Use an ISA?

ISAs are best used when you want to save or invest with the goal of tax-free returns. Depending on your goals, different types of ISAs may be more appropriate:

  • Cash ISA: Ideal if you're looking for a safe, tax-free savings account for short-term goals or emergency funds.
  • Stocks and Shares ISA: Suitable for long-term investing, especially for those comfortable with market risk.
  • Lifetime ISA: Consider this if you're saving to buy your first home or for retirement, as you can benefit from the government bonus.
  • Innovative Finance ISA: Good for investors looking to diversify into peer-to-peer lending while keeping returns tax-free.

How to Maximise the Benefit of an ISA

To make the most of your ISA, consider the following strategies:

  • Use your full allowance: Aim to maximize your annual ISA contributions to fully benefit from tax-free savings.
  • Start early: The earlier you contribute to an ISA, the longer your savings or investments have to grow tax-free.
  • Diversify: Consider spreading your contributions across different types of ISAs (e.g., Cash and Stocks & Shares) to balance risk and return.
  • Monitor and adjust: Regularly review your ISA investments and adjust based on your financial goals and risk tolerance.

References