ISA Compound Interest Calculator UK

Compound Interest Formula:

\[ A = P \times (1 + r/n)^{n \times t} \]

Principal Amount (P):

Annual Interest Rate (r):

Compounding Periods Per Year (n):

Time Period (t):

years

Future Value (A):

Total Interest Earned:

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1. What Is The ISA Compound Interest Calculator?

The ISA Compound Interest Calculator helps UK investors estimate the growth of their Individual Savings Account (ISA) investments over time. It calculates how your money can grow through the power of compound interest, taking into account your initial deposit, interest rate, and compounding frequency.

2. How Does The Calculator Work?

The calculator uses the compound interest formula:

\[ A = P \times (1 + r/n)^{n \times t} \]

Where:

\( A \) — Future value of investment
\( P \) — Principal investment amount
\( r \) — Annual interest rate (decimal)
\( n \) — Number of compounding periods per year
\( t \) — Time in years

Explanation: The formula calculates how your initial investment grows when interest is earned on both the principal and accumulated interest.

3. Importance Of Compound Interest For ISA

Details: Understanding compound interest is crucial for ISA investors as it demonstrates how regular contributions and reinvested earnings can significantly grow your tax-free savings over the long term.

4. Using The Calculator

Tips: Enter your initial ISA deposit, expected annual interest rate, select how often interest is compounded, and the time period for your investment. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is the current ISA allowance in the UK?
A: The annual ISA allowance for the 2023/2024 tax year is £20,000, but this may change in future tax years.

Q2: Are ISA interest earnings taxable?
A: No, one of the main benefits of ISAs is that interest and investment growth are tax-free.

Q3: How often is interest typically compounded in ISAs?
A: This varies by provider, but many compound interest annually, although some may compound monthly or daily.

Q4: Can I withdraw money from my ISA?
A: Yes, you can withdraw from a Cash ISA at any time, but be aware of provider-specific terms and conditions.

Q5: Does this calculator account for regular contributions?
A: This calculator calculates compound interest on a single initial investment. For regular contributions, a different formula would be needed.