ISA & Compound Interest Calculator

Where to hold regular savings in the UK

The projection above is before tax, so where the money sits decides how much of it you keep. For most UK savers the first home is an ISA: in the 2026/27 tax year you can put up to £20,000 across all your ISAs (GOV.UK), and interest, income and gains inside one are free of UK tax.

• Stocks & Shares ISA — invested in funds or shares; this is what the compound projection above is closest to over long periods.
• Cash ISA — a savings rate rather than market returns; use the compound interest mode with the account's rate.
• Lifetime ISA — for a first home or retirement, with a government bonus on what you pay in. You must be under 40 to open one.

A pension is the other big wrapper: contributions get tax relief at your marginal rate on the way in, but the money is locked away until pension age. The pension tax relief calculator shows what a contribution really costs you. Outside both, dividends and gains above your allowances are taxed — see the dividend and capital gains calculators.

Worked example: Filling your ISA allowance every year

Saving the full £20,000 ISA allowance is about £1,667 a month. At an illustrative 5% a year for 20 years:

• You pay in £400,100.
• It could grow to about £679,200 — roughly £279,200 of growth on top of what you put in.

Change the amount, return or years in the calculator above to test your own version; try a lower return too, because none of these is guaranteed.

How compounding builds wealth

Returns start earning returns of their own: a lump sum grows by FV = PV × (1 + r)ⁿ, and a regular contribution by FV = P × [ ((1 + r)ⁿ − 1) / r ] × (1 + r), where each payment compounds for as long as it stays invested. The earliest contributions do most of the work, which is why starting early matters more than starting big.

Lump sum or monthly — which ends up ahead?

Switch between the two modes and the answer is consistent: for the same total contributed, a lump sum wins, because every unit of money is invested for the full horizon rather than for an average of half of it. Take £400,000 at a 5% expected return over 20 years:

• All at once — £400,000 invested on day one grows to roughly £1,062,000.
• £2,000 a month for 20 years — the same £400,000 contributed, ending at roughly £679,000.

A £382,000 gap, purely from time in the market — but the comparison is usually hypothetical. If you don't have £400,000 today, the real choice is £2,000 a month or nothing, and £679,000 beats nothing. Monthly investing also spreads your entry over 240 different prices instead of betting everything on one day.

Where the money to invest comes from

Start from what survives tax, not your salary. Work out your monthly take-home pay, subtract what you genuinely spend, and use what's left — the whole result depends on not stopping.

Tips and common mistakes

• Use the ISA allowance before a taxable account. The £20,000 is per tax year, which ends on 5 April.
• Higher-rate taxpayer? Compare the ISA with a pension contribution, where relief at 40% changes the maths.
• Be realistic about returns. Model a conservative rate as well as an optimistic one — real returns vary and can be negative in any year.
• Compare it against paying down debt. The interest a loan overpayment saves is a guaranteed return, which an expected 10% is not.