ISA Calculator UK 2025/26 — Annual Allowance, Interest & Tax-Free Savings

Individual Savings Accounts (ISAs) let you save or invest up to £20,000 per year completely free of income tax and Capital Gains Tax. With savings interest rates at their highest in over a decade, choosing the right account has never mattered more. This calculator shows how much interest you could earn tax-free, and whether a Cash ISA beats a regular savings account after tax.

ISA Types Explained — Which Is Right for You?

There are four main types of ISA available to adults in the UK, each with different purposes and characteristics. You can hold multiple types simultaneously, and split your £20,000 annual allowance across them as you choose — except the Lifetime ISA which is capped at £4,000 of the overall allowance.

Cash ISA

A Cash ISA works just like a savings account but all interest earned is completely tax-free. In 2025, with the Bank of England base rate having been elevated, Cash ISA rates have been competitive — many easy-access Cash ISAs pay 4–5% AER. For higher and additional rate taxpayers who would otherwise pay 40–45% tax on savings interest, a Cash ISA provides significant protection. Basic rate taxpayers with relatively modest savings may find their Personal Savings Allowance (£1,000) covers all their interest — making the tax advantage of a Cash ISA less meaningful.

Stocks & Shares ISA

A Stocks & Shares ISA allows you to invest in shares, bonds, funds, investment trusts, and ETFs completely free of income tax on dividends and Capital Gains Tax on growth. Over the long term (10+ years), investing in a diversified global index fund inside a Stocks & Shares ISA has historically significantly outperformed cash savings — but returns are variable and you can lose money. The tax shelter becomes increasingly valuable as your pot grows, because there is no annual CGT allowance issue inside an ISA regardless of how large the gain.

Lifetime ISA (LISA)

The LISA is available to people aged 18–39 and designed for two specific purposes: buying a first home, or saving for retirement. You can contribute up to £4,000 per year and receive a 25% government bonus (up to £1,000/year). The bonus is paid monthly into your LISA. The significant catch: if you withdraw for any other reason before age 60, you pay a 25% withdrawal penalty — which on a 4% AER LISA effectively means you lose some of your own contributions, not just the bonus. The LISA is powerful for its intended purposes but a poor choice as a general savings vehicle.

Junior ISA (JISA)

A Junior ISA can be opened by a parent or guardian for any child under 18. The annual allowance is £9,000 (2025/26). The money belongs to the child and cannot be accessed until they turn 18, at which point it converts to an adult ISA. JISAs can be Cash or Stocks & Shares. For parents thinking about university costs or a house deposit for their child, a JISA invested in a low-cost global index fund over 10–18 years can be very powerful — compound growth tax-free over that period can produce significant returns.

Personal Savings Allowance 2025/26

The Starting Rate for Savings (£5,000 at 0%) is available to people with non-savings income below £17,570. This benefits low earners, part-time workers, and retirees who have significant savings but modest other income.

ISA vs Pension — Which Is Better?

Both ISAs and pensions offer powerful tax advantages, but they work differently and serve different purposes. Pensions give you tax relief on the way in (contributions reduce your taxable income) but are taxable on withdrawal (25% tax-free lump sum, rest taxed as income). ISAs are funded from post-tax income but are completely tax-free on withdrawal — no tax ever, no matter how large the pot grows.

For most people, maximising pension contributions first (especially to get employer matching) then using any remaining allowance for an ISA is the optimal strategy. For those who want access to their money before age 55 (57 from 2028), ISAs offer much more flexibility — pension money is locked away until minimum pension age.

Transferring ISAs

You can transfer money between ISA providers and between ISA types (for example, from a Cash ISA to a Stocks & Shares ISA) without losing the tax-free status or using up your annual allowance. Always transfer via the ISA transfer process — never withdraw and re-deposit, as this would count as a new subscription and use up your annual allowance.