ISA Interest Calculator UK

ISA Interest Formula:

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

Principal Amount (P):

GBP

Annual Interest Rate (R):

decimal

Compounding Frequency (n):

per year

Time Period (T):

years

Maturity Amount (A):

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1. What is the ISA Interest Calculator?

The ISA Interest Calculator helps UK investors estimate the growth of their Individual Savings Account (ISA) investments using compound interest calculations. It provides an accurate projection of maturity amounts based on principal, interest rate, compounding frequency, and time period.

2. How Does the Calculator Work?

The calculator uses the compound interest formula:

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

Where:

\( A \) — Maturity amount (GBP)
\( P \) — Principal investment amount (GBP)
\( R \) — Annual interest rate (decimal)
\( n \) — Compounding frequency per year
\( T \) — Time period in years

Explanation: The formula calculates how your ISA investment grows over time with compound interest, where interest is added to the principal at regular intervals, earning more interest in subsequent periods.

3. Importance of ISA Interest Calculation

Details: Accurate interest calculation is crucial for financial planning, helping investors understand potential returns, compare different ISA products, and make informed investment decisions for tax-free savings growth.

4. Using the Calculator

Tips: Enter principal amount in GBP, annual interest rate as a decimal (e.g., 0.05 for 5%), compounding frequency (typically 1 for annual, 12 for monthly, 365 for daily), and time period in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What types of ISAs can this calculator be used for?
A: This calculator works for Cash ISAs, Stocks and Shares ISAs, and Innovative Finance ISAs that offer fixed interest rates with regular compounding.

Q2: How accurate are the calculations?
A: The calculations are mathematically precise for fixed interest rates. For variable rates or market-linked returns, results are estimates based on the input rate.

Q3: Are ISA returns really tax-free?
A: Yes, one of the main benefits of ISAs in the UK is that all interest, dividends, and capital gains are completely tax-free, regardless of your income tax band.

Q4: What's the current ISA allowance?
A: The annual ISA allowance changes each tax year. For 2024-2025, the allowance is £20,000 across all ISA types (subject to government changes).

Q5: Can I withdraw money from my ISA?
A: Yes, you can withdraw from most ISAs, but terms vary by provider. Some may restrict withdrawals or offer flexible ISAs that allow replacement of withdrawn funds within the same tax year.