ISA Calculator
Project ISA growth against a taxable account for 2026-27, showing the tax saved on dividends and gains, and the Lifetime ISA bonus where it applies.
How to use this calculator
- 1Enter what you already hold in ISAs and what you plan to add each year, up to the £20,000 allowance.
- 2Set a realistic return — a cash ISA and a stocks and shares ISA justify very different figures.
- 3Tick Lifetime ISA if you are using one, remembering the £4,000 sub-limit and the age and purpose restrictions.
- 4Set the tax rate you would otherwise pay to see what the wrapper is actually worth to you.
How the calculation works
ISA = FV(contributions + any Lifetime ISA bonus, compounded, untaxed). Taxable comparison compounds at return × (1 − tax rate)- allowance
- £20,000 for 2026-27, across every ISA type combined
- Lifetime ISA bonus
- 25% on up to £4,000 a year, paid on top of the allowance rather than counting toward it
Contributions are treated as made at the start of each year, so they earn a full year of growth. That matches how most people use an annual allowance and is why paying in early in the tax year beats paying in late.
The taxable comparison applies the tax rate to the return each year, which is a simplification: a real taxable account would defer capital gains until sale and use the annual exempt amount. It models the dividend and interest drag well, and overstates the drag on a pure growth portfolio.
The Lifetime ISA bonus is a 25% top-up on contributions, which is not the same as recovering a 25% loss. It is the exact mirror of basic-rate relief on a pension contribution.
Worked example
£12,000 a year for 20 years at 6%
- 1.Contributions total £20,000 already held plus £12,000 × 20 = £260,000 paid in.
- 2.Compounding at 6% with contributions at the start of each year builds substantially more than that.
- 3.Every penny of the growth and income is free of UK tax — no dividend tax, no capital gains tax, nothing to report.
- 4.The same contributions taxed at 35.75% each year would compound at an effective 3.86% instead.
Result: A large tax-free balance, well ahead of the taxed equivalent
What an ISA actually is
An ISA is not a type of investment — it is a tax wrapper that can hold cash, funds, shares or bonds. What it does is simple and unusually generous: everything inside is free of UK income tax, dividend tax and capital gains tax, permanently, with nothing to declare on a tax return.
The allowance is £20,000 for 2026-27, and has been frozen at that level since 2017-18. It applies across all ISA types combined, so paying £15,000 into a stocks and shares ISA leaves £5,000 for everything else. Crucially, it is a limit on new money paid in, not on the balance — an ISA built up over many years can be worth far more than the allowance without any problem.
The allowance is also use-it-or-lose-it. Unused allowance cannot be carried forward, which is why the end of the tax year on 5 April produces a rush of last-minute contributions every year.
Why the wrapper is worth more than it looks
The value of an ISA compounds in a way that is easy to underestimate, because the tax saved each year would itself have been invested.
It has also grown considerably more valuable in recent years without any change to the ISA rules themselves. The dividend allowance outside an ISA fell from £5,000 in 2016-17 to £500 today, and dividend rates rose again in April 2026 to 10.75% and 35.75%. The capital gains annual exempt amount fell from £12,300 to £3,000 over the same period. Every one of those cuts increased the value of sheltering the same portfolio inside an ISA.
There is a second, quieter benefit: nothing inside an ISA appears on a tax return. For anyone who would otherwise be pushed into Self Assessment by dividend or gains reporting, that administrative saving is worth real time.
The Lifetime ISA, and its sharp edges
A Lifetime ISA adds a 25% government bonus on contributions of up to £4,000 a year — up to £1,000 free each year, paid monthly, and it does not count toward the £20,000 allowance. It can be opened between 18 and 39 and contributed to until 50.
The restrictions are strict and catch people out. The money can only be withdrawn without penalty for a first home costing £450,000 or less, or from age 60. Any other withdrawal incurs a 25% charge — and because that charge applies to the whole withdrawal rather than just the bonus, it takes back more than the bonus gave. Someone paying in £4,000 receives £1,000, and withdrawing the resulting £5,000 early loses £1,250, leaving £3,750 from a £4,000 contribution.
The £450,000 property cap has not moved since the product launched in 2017, which in parts of the country now excludes a large share of typical first homes — a real risk for someone saving toward a purchase in an expensive area.
A change worth planning around
One restriction is scheduled rather than current. From April 2027, the amount that savers under 65 can pay into a cash ISA is due to be reduced, with the remainder of the allowance usable only in stocks and shares, Lifetime or Innovative Finance ISAs.
That does not affect the 2026-27 year this calculator models, where the full £20,000 can still go into cash. But for anyone whose ISA strategy is cash-only, this is the last year of the unrestricted allowance, and it is worth knowing before rather than after.
What this assumes, and where it stops
Assumptions
- Contributions are made at the start of each tax year and stay within the £20,000 allowance.
- A constant annual return applies throughout.
- The taxable comparison taxes the return each year at the single rate entered.
- Any Lifetime ISA bonus is paid on contributions up to £4,000 and is invested alongside them.
Limitations
- The taxable comparison is simplified: a real taxable account defers capital gains until sale and has a £3,000 annual exempt amount, so the drag on a pure growth portfolio is overstated.
- Lifetime ISA age limits, the £450,000 property cap and the 25% early withdrawal charge are described but not enforced by the projection.
- The cash ISA restriction scheduled for April 2027 is not modelled, since it does not apply in 2026-27.
- Flexible ISA rules, which allow withdrawal and replacement within the same year without using allowance, are not modelled.
Common questions
What is the ISA allowance for 2026-27?
£20,000, across all ISA types combined — it has been frozen at that level since 2017-18. It is a cap on new money paid in during the tax year, not on the balance, so an ISA built up over many years can hold far more. Unused allowance cannot be carried forward, and transfers between providers do not use any of it.
Is a Lifetime ISA worth it?
The 25% bonus on up to £4,000 a year is genuinely valuable if you meet the conditions — a first home costing £450,000 or less, or waiting until 60. The catch is that any other withdrawal carries a 25% charge applied to the whole amount, not just the bonus, so you get back less than you put in. A £4,000 contribution becomes £5,000, and withdrawing early leaves £3,750. The £450,000 cap has not risen since 2017 and now excludes many typical first homes in expensive areas.
How much tax does an ISA actually save?
More than it used to, because the allowances outside one have been cut sharply. The dividend allowance fell from £5,000 in 2016-17 to £500 today and dividend rates rose again in April 2026; the capital gains annual exempt amount fell from £12,300 to £3,000. Everything inside an ISA escapes all of that permanently, and none of it appears on a tax return.
Can I pay into more than one ISA?
Yes — you can now pay into multiple ISAs of the same type in the same tax year, provided the total across all of them stays within the £20,000 allowance. Transfers between providers are separate and never use up allowance, so you can move existing ISA money freely without affecting what you can pay in.
Sources
- Individual Savings Accounts (ISAs) — HM Revenue & Customs
- Lifetime ISA — HM Revenue & Customs
Formula and content last reviewed on .
Results are estimates for information only, not professional advice.
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