UK ISA Calculator: Future Value of a Tax-Free Lump Sum
Work out what a lump sum invested in a UK Individual Savings Account (ISA) grows to over time — with all growth, interest, and gains free of UK income tax and capital gains tax.
Adjust the inputs and select Calculate for a full breakdown.
Compare Common Scenarios
How the numbers shift across typical situations for this calculator:
| Scenario | Future value | Total growth |
|---|---|---|
| £20k · 5% · 10yr | $32,577.89 | $12,577.89 |
| £10k · 6% · 20yr | $32,071.35 | $22,071.35 |
| £50k · 5% · 15yr | $103,946.41 | $53,946.41 |
| £5k · 7% · 25yr | $27,137.16 | $22,137.16 |
How This Calculator Works
Enter your ISA lump sum, the annual return you expect, and how many years it stays invested. The calculator compounds the amount and shows the ending value and total growth. The ISA wrapper means no UK tax on the interest, dividends, or capital gains earned inside it.
The Formula
Future Value of a Lump Sum
PV = present value, r = annual rate, n = number of years
Worked Example
£20,000 invested in a Stocks & Shares ISA at 5% for 10 years grows to about £32,578 — with roughly £12,578 of tax-free growth. The ISA's appeal is the tax shelter: contributions are from after-tax income (no upfront relief), but all returns inside the ISA are free of UK income tax, dividend tax, and capital gains tax, and withdrawals are tax-free too. There are several ISA types — Cash ISA, Stocks & Shares ISA, Lifetime ISA, and Innovative Finance ISA — sharing one annual allowance.
Key Insight
The ISA is the cornerstone tax-free savings/investment wrapper in the UK, and using it well means matching the ISA type to your goal and using the annual allowance. The main types share a single annual ISA allowance (the total you can pay in across all ISAs per tax year): a Cash ISA (tax-free interest, like a savings account), a Stocks & Shares ISA (tax-free investment growth — best for long horizons, modelled here), a Lifetime ISA or LISA (for first home or retirement, with a 25% government bonus but withdrawal restrictions), and an Innovative Finance ISA (peer-to-peer lending). Key points: this calculator shows a Stocks & Shares ISA lump sum, where the tax-free compounding of investment returns over years is most valuable; the annual allowance resets each tax year (use it or lose it — unused allowance doesn't carry forward, unlike a pension), so many investors contribute before the 5 April tax-year end; and platform and fund fees reduce real returns, so favour low-cost options. ISA vs pension: a pension gives upfront tax relief but locks money away until a minimum age and is taxed on withdrawal (beyond the tax-free lump sum), while the ISA gives no upfront relief but offers tax-free, fully-flexible access — many use both, often the pension for retirement and the ISA for flexibility and medium-term goals. The projection is a constant-return estimate (real markets vary), but every pound of growth shown is free of UK tax.
£20,000 annual allowance: the most generous tax shelter in Britain
Every UK adult gets a £20,000 ISA allowance each tax year (6 April to 5 April). This can be split across multiple ISA types — Cash ISA, Stocks & Shares ISA, Innovative Finance ISA, Lifetime ISA (capped at £4,000 within the £20k) — or invested entirely in one. The allowance does NOT carry forward; unused room is permanently lost at the end of the tax year.
Couples effectively double the allowance: each spouse has their own £20,000, so a couple can shelter £40,000 of fresh contributions per year. Children get the £9,000 Junior ISA allowance from 6 April 2024 (held until 18, when it converts to an adult ISA). A family of four can shelter £58,000/year combined.
From April 2024, you can pay into multiple ISAs of the same type within the same tax year — a significant change. Previously you could only open and contribute to ONE Cash ISA AND ONE S&S ISA per tax year; now you can split contributions across multiple Cash ISAs (e.g. to get better rates at different banks) without rule violation.
Inside the ISA: zero tax on income, gains, and withdrawals
Income (dividends, interest, bond coupons) earned inside an ISA is completely tax-free — no UK income tax owed regardless of amount. The £500 dividend allowance and £1,000 personal savings allowance (basic-rate taxpayers) don't apply because they're irrelevant: ISA income is tax-free anyway.
Capital gains inside an ISA are also tax-free — no CGT on sale, no impact on your £3,000 annual CGT allowance, no need to report on self-assessment. For a long-horizon S&S ISA accumulating significant gains over decades, this is an enormous benefit. A £20k/year contribution at 7% return for 30 years grows to ~£2M, with ~£1.5M of growth completely tax-free.
Withdrawals from an ISA are tax-free with no reporting requirements. You don't need to file a self-assessment return just because you withdraw from an ISA. 'Flexible ISAs' (most providers offer these now) let you withdraw and recontribute within the same tax year without using new allowance — a major improvement on the old 'lose the room' rules.
ISA vs pension vs LISA: the strategic stack
For long-horizon retirement saving, the strict math says: pension > LISA > ISA. Pensions get tax relief at your marginal rate (20%/40%/45%) on contributions, with 25% tax-free at withdrawal. The Lifetime ISA gives a 25% government bonus up to £4,000/year (£1,000 bonus), but locked until 60 or first home purchase.
Practical optimisation for a basic-rate taxpayer aged 25 with £30k disposable income: (1) Pension up to employer match (free money), (2) LISA £4,000 for the £1,000 government bonus, (3) Pension to next £4,000 of room, (4) ISA for the rest. For a higher-rate taxpayer: (1) Pension match, (2) Pension to limit the 40% relief, (3) ISA for flexibility.
ISA wins for short/medium horizon savings (house deposit beyond LISA cap, university costs, emergency fund), flexible early retirement bridge income, and money for use before pension access age (currently 55, rising to 57 in 2028). The 'first home' and age-60 lockup of LISA, plus the 25% withdrawal penalty for any other use, makes it unsuitable for ambiguous-purpose savings.
ISA growth at the £20,000 annual cap over various horizons
Assumes maximum £20,000/year contribution (£1,667/month equivalent) at typical returns. Real-world contributors who can't max the allowance scale proportionally.
| Years contributing | Total contributed | Value at 5% return | Value at 7% return | Value at 9% return |
|---|---|---|---|---|
| 10 years | £200,000 | £258,000 | £283,000 | £312,000 |
| 20 years | £400,000 | £694,000 | £838,000 | £1,012,000 |
| 30 years | £600,000 | £1,393,000 | £1,889,000 | £2,580,000 |
| 40 years | £800,000 | £2,541,000 | £3,997,000 | £6,338,000 |
Compounding compounds — pencil the difference between 5% and 9% over 40 years. Annual contribution caps mean ISA inflows are limited, but lifetime growth is unlimited. After-tax compounding inside ISA wraps the entire amount tax-free.
Frequently Asked Questions
How is ISA growth calculated?
The lump sum is multiplied by (1 + annual return) raised to the number of years. £20,000 at 5% for 10 years is £20,000 × 1.05¹⁰ ≈ £32,578 — all of it tax-free within the ISA.
Is ISA growth really tax-free?
Yes. Contributions come from after-tax income (no upfront tax relief), but all interest, dividends, and capital gains earned inside the ISA are free of UK income tax, dividend tax, and capital gains tax — and withdrawals are tax-free too. That tax shelter is the ISA's core benefit.
What are the different types of ISA?
Cash ISA (tax-free interest), Stocks & Shares ISA (tax-free investment growth, modelled here), Lifetime ISA/LISA (first home or retirement, with a 25% government bonus but withdrawal rules), and Innovative Finance ISA (peer-to-peer lending). They share a single annual ISA allowance across all types.
Does the ISA allowance carry forward?
No — unlike pension allowances, unused ISA allowance does not carry to the next tax year (use it or lose it). The allowance resets each tax year, which is why many investors top up their ISA before the 5 April tax-year end to avoid losing that year's allowance.
ISA or pension — which should I use?
A pension gives upfront tax relief but locks money away until a minimum age and is taxed on withdrawal (beyond the tax-free lump sum); the ISA gives no upfront relief but offers tax-free, flexible access at any time. Many people use both — the pension for retirement, the ISA for flexibility and medium-term goals.
References & Authoritative Sources
- HMRC — His Majesty's Revenue and Customs — Individual Savings Accounts (ISAs) — official guide · consulted May 31, 2026 · UK tax authority — annual allowance, ISA types, tax treatment
- Income Tax Act 2007 — Sections 694-708 — Statutory basis for ISA tax exemption · consulted May 31, 2026 · Primary statute — ISA framework, tax relief, qualifying investments
- FCA — Financial Conduct Authority — ISA providers and consumer protection · consulted May 31, 2026 · Financial regulator — provider authorization, FSCS protection up to £85,000 per provider
Related Calculators
Methodology & Review
Future value is the lump sum compounded at the annual return over the period. It assumes the amount is invested at once within an ISA and left untouched at a constant return; it ignores platform/fund fees and does not enforce the annual ISA allowance.
Updated