1. What is Cash ISA Interest Calculation?

Cash ISA (Individual Savings Account) interest calculation determines the amount of interest earned on savings deposited in a tax-free savings account. The simple interest formula calculates earnings based on principal amount, annual interest rate, and time period.

2. How Does the Calculator Work?

The calculator uses the simple interest formula:

Where:

• \( I \) — Interest earned (currency units)
• \( P \) — Principal amount (currency units)
• \( R \) — Annual interest rate (%)
• \( T \) — Time period (years)

Explanation: The formula calculates simple interest by multiplying the principal amount by the annual interest rate (converted from percentage to decimal) and the time period in years.

3. Importance of Interest Calculation

Details: Accurate interest calculation helps savers understand their potential earnings, compare different ISA products, and make informed decisions about their savings strategy.

4. Using the Calculator

Tips: Enter principal amount in currency units, annual interest rate as a percentage, and time period in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Is this calculation for simple or compound interest?
A: This calculator uses the simple interest formula. Most Cash ISAs typically use compound interest, but this provides a basic calculation.

Q2: Are Cash ISA earnings really tax-free?
A: Yes, interest earned in a Cash ISA is free from UK income tax and capital gains tax, within the annual allowance limits.

Q3: What's the current ISA allowance?
A: The annual ISA allowance varies by tax year. Check the latest HMRC guidelines for current limits.

Q4: Can I withdraw money from my Cash ISA?
A: Most Cash ISAs allow withdrawals, but terms vary by provider. Some may restrict withdrawals or offer better rates for fixed-term accounts.

Q5: How often is interest paid on Cash ISAs?
A: Interest payment frequency varies by provider - typically monthly, quarterly, or annually. Check your specific account terms.