ISA Interest Calculator

How ISA Interest Works in the UK

An Individual Savings Account (ISA) is a tax-efficient wrapper that lets UK savers and investors earn interest or returns completely free of income tax and capital gains tax. Unlike a standard savings account, everything you earn inside an ISA stays yours — no portion goes to HMRC.

Cash ISAs work like normal savings accounts but with the tax-free guarantee. Stocks & Shares ISAs offer the same tax wrapper for investments. The calculator above focuses on interest-based growth (Cash ISA or equivalent rates), though the same tax benefit applies to investment returns.

The £20,000 Annual Allowance

In the 2025/26 tax year, the ISA allowance is £20,000. You can pay in up to this amount across all your ISAs each tax year. The allowance doesn't roll over — if you don't use it, you lose it. There is no limit on how much interest or growth you can earn once the money is inside; the £20,000 cap applies only to new money you put in.

You can split your allowance between Cash ISAs and Stocks & Shares ISAs, or use a Lifetime ISA (up to £4,000 of the allowance). The calculator above assumes a lump sum for simplicity; use the time period slider to project growth over 1–20 years.

ISA vs Taxable Savings: The Difference

In a taxable account, interest is subject to income tax. Basic rate taxpayers pay 20% on interest above the Personal Savings Allowance (£1,000); higher rate taxpayers pay 40% on interest above £500; additional rate taxpayers have no allowance and pay 45% on all savings interest. The calculator compares your ISA balance (tax-free) against what you'd have in a taxable account after paying tax on the interest each year.

The longer you save and the higher your tax band, the greater the benefit of using an ISA. At current rates of around 4.75% for easy-access savings, £10,000 over 10 years could earn over £5,000 in tax-free interest inside an ISA (at 4.75% compound growth).

Current UK Savings Rates

Cash ISA rates typically track ordinary savings rates, which are influenced by the Bank of England base rate (currently 4.5%). Easy-access Cash ISAs often offer slightly less than equivalent taxable accounts, but the tax benefit can still make them worthwhile — especially for higher and additional rate taxpayers. The calculator uses the average easy-access rate of 4.75% by default; adjust to match your own offer.

Frequently Asked Questions

How much interest can I earn tax-free in an ISA?

There is no cap on interest earned. All growth inside an ISA is tax-free. The only limit is the £20,000 you can pay in per tax year. Use the calculator above to project how much you could earn over 1–20 years.

What is the ISA allowance for 2025/26?

The ISA allowance for 2025/26 is £20,000. You can subscribe to Cash ISAs, Stocks & Shares ISAs, Innovative Finance ISAs, or a Lifetime ISA (up to £4,000). The allowance resets each tax year and does not carry forward.

Should I use an ISA or a taxable savings account?

If you're a basic rate taxpayer with modest savings, the Personal Savings Allowance (£1,000) may shelter your interest. Higher and additional rate taxpayers benefit more from ISAs. Even within the PSA, an ISA keeps your growth permanently tax-free and doesn't count toward the allowance.

Do I need to declare ISA interest on my tax return?

No. ISA interest and returns are completely tax-free and do not need to be reported to HMRC. They are not included in your taxable income.