ISA Compound Interest Calculator

Compound Interest Formula:

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

Principal Amount (P):

Annual Interest Rate (r):

Compounding Frequency (n):

Time (t):

years

Future Value (A):

Interest Earned:

Unit Converter ▲

Unit Converter ▼

From:	To:

1. What is the ISA Compound Interest Calculator?

The ISA Compound Interest Calculator helps you estimate the future value of your Individual Savings Account (ISA) investments using the compound interest formula. It calculates how your money can grow over time with regular compounding.

2. How Does the Calculator Work?

The calculator uses the compound interest formula:

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

Where:

\( A \) — Future value of the investment (£)
\( P \) — Principal investment amount (£)
\( r \) — Annual interest rate (decimal)
\( n \) — Number of times interest is compounded per year
\( t \) — Time the money is invested for (years)

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

3. Importance of Compound Interest Calculation

Details: Understanding compound interest is crucial for long-term financial planning. It shows how small, regular investments can grow significantly over time, helping you make informed decisions about your ISA contributions and investment strategy.

4. Using the Calculator

Tips: Enter your initial investment amount in pounds, annual interest rate as a percentage, select how frequently interest compounds, and the investment period in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is an ISA?
A: An Individual Savings Account (ISA) is a tax-efficient savings and investment account available to UK residents. You don't pay tax on interest, dividends, or capital gains from investments held in an ISA.

Q2: How often should I compound interest for maximum growth?
A: The more frequently interest compounds, the faster your money grows. Daily compounding typically yields the highest returns, followed by monthly, quarterly, semi-annual, and annual compounding.

Q3: Are ISA interest rates fixed?
A: It depends on the type of ISA. Some offer fixed rates, while others have variable rates that can change over time. Always check the terms of your specific ISA product.

Q4: What's the difference between simple and compound interest?
A: Simple interest is calculated only on the principal amount, while compound interest is calculated on both the principal and accumulated interest, leading to exponential growth over time.

Q5: Are there contribution limits for ISAs?
A: Yes, there is an annual ISA allowance set by the UK government. For the current tax year, the limit is £20,000 across all types of ISAs (as of 2024).