ISA Calculator

About ISA Calculator

Project how your ISA savings grow tax-free over time. Choose between Cash ISA, Stocks and Shares ISA, or Lifetime ISA (with 25% government bonus). See year-by-year projections and compare against a taxable account to understand the real benefit of the ISA wrapper.

ISA Types at a Glance

	Cash ISA	Stocks and Shares ISA	Lifetime ISA (LISA)
Annual limit	£20,000 (shared)	£20,000 (shared)	£4,000 (within £20K total)
Returns	Fixed interest (3-5%)	Market returns (variable)	Cash or investments + 25% bonus
Risk	None (FSCS protected up to £85K)	Capital at risk	Depends on cash or investment choice
Access	Instant (usually)	A few days to sell	First home or age 60 only (25% penalty otherwise)
Tax benefit	Interest tax-free	No CGT, no income tax on dividends	Same as above + 25% bonus
Best for	Emergency fund, short-term goals	Long-term investing (5+ years)	First home deposit or retirement

The £20,000 annual allowance is shared across all ISA types. You cannot carry forward unused allowance to future years.

The Tax-Free Advantage Over Time

The ISA benefit compounds over time. Here is a comparison of £10,000/year invested for 20 years at 7% return:

	ISA (tax-free)	Taxable (higher rate)	Difference
Total contributed	£200,000	£200,000	£0
Growth	£209,692	~£155,000	~£54,692
Final value	£409,692	~£355,000	~£54,692

The taxable account loses value to income tax on dividends (33.75% for higher rate) and CGT on gains (24%). Over 20 years, the ISA advantage can exceed £50,000 for a higher-rate taxpayer.

For basic-rate taxpayers, the advantage is smaller but still meaningful because the Personal Savings Allowance (£1,000) and dividend allowance (£500) shelter some returns. As balances grow, these allowances become insufficient and the ISA advantage kicks in.

Lifetime ISA: The 25% Bonus

The LISA is uniquely powerful for qualifying goals:

• Contributions: Up to £4,000/year between ages 18-49
• Bonus: 25% on each contribution (up to £1,000/year bonus)
• Qualifying withdrawals: First home purchase (up to £450,000) or after age 60
• Penalty for other withdrawals: 25% of the withdrawn amount (effectively losing the bonus plus 6.25% of your own money)

Example: Contributing £4,000/year from age 25 to 50 at 5% growth:

You contribute £100,000. Government adds £25,000 in bonuses. With 5% compound growth: final value of roughly £225,000.

The 25% bonus is an immediate guaranteed return that no other investment can match. For first-time buyers saving for a deposit, the LISA is almost always the best vehicle for the first £4,000/year.

Cash ISA vs Stocks and Shares ISA

The choice depends on your time horizon:

• Under 3 years: Cash ISA. You need the money soon and cannot afford a stock market downturn.
• 3-5 years: Either, depending on risk tolerance. A cautious portfolio might work, but cash gives certainty.
• 5+ years: Stocks and Shares ISA almost certainly wins. Historically, over any 10+ year period, stock market returns have beaten cash savings.

Current Cash ISA rates of 4-5% are historically high. In 2021, most paid under 1%. Stocks and Shares ISAs have averaged 7-10% over the long term but with years of -20% mixed in.

ISA Strategy Tips

• Max out employer pension match first: This is effectively a guaranteed 100% return (if your employer matches 1:1). ISA comes after pension match.
• Use the full £20,000 allowance: Unused allowance expires on 5 April. Even moving money in late March is better than losing it.
• Invest early in the tax year: Lump sum investing in April beats drip-feeding over the year roughly two-thirds of the time, because markets tend to go up.
• Bed and ISA: Sell investments in a general account and immediately rebuy within your ISA. You crystallise any gain (hopefully within your CGT exempt amount) and future growth is tax-free.
• Flexible ISAs: Some providers offer flexible ISAs where withdrawn money can be replaced in the same tax year without using more allowance. Useful for short-term cash needs.

For general investment projections, the investment return calculator models growth without the ISA framing. For retirement income planning, the pension drawdown calculator projects how long a pot lasts.

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