An Individual Savings Account (ISA) is a UK tax-free wrapper for savings and investments. The 2026 annual subscription limit is 20,000 GBP, split across any combination of Stocks & Shares, Cash, Innovative Finance, and Lifetime ISAs.
Quick answer. An Individual Savings Account (ISA) is a UK tax-free wrapper for savings and investments. The 2026 annual subscription limit is 20,000 GBP, split across any combination of Stocks & Shares, Cash, Innovative Finance, and Lifetime ISAs.
Interactive calculator
ISA calculator (UK)
UK Individual Savings Account: all growth is tax-free.
Projected balance-
Total contributed-
Growth-
Lifetime tax savings (estimated)-
How is this calculated?
FV = balance * (1+r)^t + PMT * ((1+r)^t - 1) / r
Tax savings approximates the value of either (a) up-front deductions (Traditional / RRSP / FHSA) or (b) tax-free growth (Roth / TFSA / ISA) relative to a taxable account.
Use the working calculator
UK ISA Calculator
Working calculator with subscription-cap tracking and FY year-end planning.
An Individual Savings Account (ISA) is a UK tax-free wrapper for cash savings and investments, introduced in 1999 to replace the older PEP and TESSA schemes. Anything inside an ISA grows free of UK income tax, dividend tax, and capital gains tax indefinitely, with no withdrawal restrictions and no Self Assessment reporting. The ISA calculator projects the future balance of regular subscriptions over your chosen horizon and shows the tax saving versus the equivalent General Investment Account exposed to dividend and CGT charges.
The 2026/27 tax year allows a 20,000 GBP annual subscription per individual, split in any combination across the four ISA flavours: Stocks and Shares ISA (equities, funds, bonds), Cash ISA (interest-bearing deposits), Innovative Finance ISA (peer-to-peer lending), and Lifetime ISA (first home or retirement, capped at 4,000 GBP within the overall 20,000 GBP). The 20,000 GBP cap is frozen until at least 2030 under current Treasury policy.
How it works
FV balance = Balance x (1+r)^n + PMT x ((1+r)^n - 1) / r
Tax-free benefit = (Dividend tax saved) + (CGT saved) + (income tax saved)
LISA bonus = 25 percent x annual LISA contribution (max 1,000 GBP/yr)
Spouse APS = surviving spouse inherits ISA wrapper on top of own cap
PMT = annual ISA subscription, max 20,000 GBP across all ISA types combined for 2026/27.
r = expected annual nominal return; 5 to 7 percent for diversified equity, 4 to 5 percent for cash ISA at 2026 rates.
n = years of subscriptions; the ISA wrapper continues indefinitely.
Marginal tax rate = 20, 40, or 45 percent UK income tax band; determines the value of the income shelter.
Dividend tax = 8.75, 33.75, or 39.35 percent on dividends above the 500 GBP allowance; saved entirely inside ISA.
CGT = 18 percent (basic rate) or 24 percent (higher rate) on gains above the 3,000 GBP annual allowance (2025/26 onwards); saved entirely inside ISA.
Worked example
Consider a UK higher-rate taxpayer (40 percent) in 2026/27 fully subscribing 20,000 GBP per year to a Stocks and Shares ISA for 25 years at 5 percent real return:
Total subscriptions: 20,000 GBP x 25 = 500,000 GBP.
Projected balance: 20,000 x ((1.05)^25 - 1) / 0.05 = approximately 954,000 GBP.
Growth: 954,000 - 500,000 = 454,000 GBP of capital gains and dividend income sheltered tax-free.
Equivalent General Investment Account (with 24 percent CGT, simplified): after realizing gains over time, after-tax balance approximately 778,000 GBP.
ISA advantage over GIA: 954,000 - 778,000 = 176,000 GBP saved over 25 years.
Withdrawal: any amount, any time, completely tax-free with no Self Assessment required.
Inheritance: on death, the surviving spouse can inherit the full ISA wrapper via Additional Permitted Subscription, preserving tax-free status for the next generation.
Result: 25 years of 20,000 GBP annual ISA subscriptions builds a 954,000 GBP tax-free pot at 5 percent return, roughly 176,000 GBP more than the same strategy in a taxable General Investment Account. The cumulative tax saving is the strongest argument for prioritising ISA subscriptions over GIA every tax year before April 5.
2026/27 ISA types and limits
ISA type
Annual cap
Eligibility
Key feature
Stocks and Shares ISA
20,000 GBP (shared total)
UK resident 18+
Equities, funds, bonds, ETFs
Cash ISA
20,000 GBP (shared total)
UK resident 16+
Interest-bearing deposits
Innovative Finance ISA
20,000 GBP (shared total)
UK resident 18+
Peer-to-peer lending
Lifetime ISA (LISA)
4,000 GBP within 20,000
UK resident 18-39 to open
25% gov bonus; first home or 60+
Junior ISA
9,000 GBP (separate cap)
Under 18; parent opens
Locked until child turns 18
Inheritance (APS)
Deceased's ISA value
Surviving spouse
On top of own 20,000 GBP cap
Same-type multiple ISAs
n/a
From April 2024
Can open more than one of same type/year
Common mistakes
Withdrawing and re-depositing instead of transferring. Withdrawn money loses its ISA status. Subsequent re-deposit consumes fresh subscription room. Always use the receiving provider's transfer form to keep the wrapper intact.
Missing the April 5 deadline. Unused 20,000 GBP allowance does NOT carry forward. Each tax year is use-it-or-lose-it from 6 April to 5 April.
Mixing LISA with other ISAs incorrectly. The 4,000 GBP LISA cap counts within the 20,000 GBP overall ISA total, not on top. Maxing LISA leaves 16,000 GBP for other ISA types in the same year.
Withdrawing LISA early. The 25 percent penalty on non-qualifying LISA withdrawals reclaims the government bonus plus an extra 6.25 percent of original contributions. Avoid LISA unless you are confident the funds will go to a qualifying first home or stay until age 60.
Forgetting flexible ISA rules. Some ISA providers offer flexible withdrawals where you can replace funds within the same tax year without using new allowance. Not all providers support this; check before withdrawing.
Overlooking the spouse APS. Surviving spouses can inherit the deceased's ISA value as an Additional Permitted Subscription, effectively doubling that year's tax-free room. Many widowed savers fail to claim this within the 3-year window.
20,000 GBP per individual per UK tax year (6 April 2026 to 5 April 2027). The cap can be split in any combination across Stocks and Shares ISA, Cash ISA, Innovative Finance ISA, and Lifetime ISA (LISA contributions are capped at 4,000 GBP within the 20,000 GBP overall total). From April 2024, savers can also pay into more than one ISA of the same type within a tax year, a flexibility added by the British ISA reforms. The 20,000 GBP cap is frozen until at least 2030 under current Treasury policy.
Are ISAs really tax-free?+
Yes, completely. All interest, dividends, and capital gains inside an ISA are exempt from UK income tax, dividend tax, and capital gains tax. There are no withdrawal taxes at any age, no required minimum distributions, and no need to declare the income on a Self Assessment return. The tax exemption survives at probate: a surviving spouse can inherit the deceased's ISA wrapper as an Additional Permitted Subscription (APS) on top of their own 20,000 GBP annual cap, preserving the tax-free status of the underlying assets.
Can I transfer ISAs between providers?+
Yes, ISA transfers between providers do not count against your annual 20,000 GBP subscription cap, and they do not break the tax-free wrapper. You must use the receiving provider's official ISA transfer form so the funds move provider-to-provider; do NOT withdraw and re-deposit, as withdrawn money loses its ISA status and would consume new subscription room when re-paid in. Cash ISA to S&S ISA and vice versa is allowed. Transfers of the current tax year's contributions must move in full, prior years can be partial.
What is a Lifetime ISA and how does it differ?+
A Lifetime ISA (LISA) is a sub-type for first-home purchase or retirement, available to UK residents aged 18 to 39 to open. Maximum contribution is 4,000 GBP per year (counted within the overall 20,000 GBP ISA cap), and the government adds a 25 percent bonus on contributions (up to 1,000 GBP per year). Funds can be withdrawn tax-free for a qualifying first home up to 450,000 GBP, OR after age 60 for any purpose. Other withdrawals attract a 25 percent penalty that effectively recovers the bonus plus a small extra charge.
