Compound Interest ISA Calculator UK: How Compounding Works
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A compound interest ISA calculator shows how a balance grows when each period's return is added to the balance and then earns a return itself. For the 2026-27 tax year, gov.uk says that if you complete a tax return you do not need to declare any ISA interest, income or capital gains on it, so in a calculator the whole assumed return is left to compound. The results are illustrations from assumed rates, not forecasts, and investment values can fall as well as rise.
The site's rules data was last checked against gov.uk on 26 September 2026. Figures typed in this guide may not yet reflect a later change, and the descriptions of gov.uk pages are summaries that may also lag. The current figures are on the ISA rules at a glance page. General information only, not financial advice.
What is compound interest in an ISA?
Compound interest is interest earned on interest. When savings produce a return, whether interest from a cash account or growth from an investment, the return is added to the balance. In the next period the return is earned on the new, larger balance. Over many years the effect grows, because each period's return is worked out on a bigger amount than the last.
gov.uk says you can save tax-free with ISAs and that you keep your savings on a tax-free basis for as long as you keep the money in your ISA accounts. That is why a calculator for an ISA can leave tax out of the sum. Outside an ISA, interest, dividends and gains can be taxed once allowances are used, which would reduce the amount left to compound. See is ISA interest taxable? for the detail on interest.
How does compounding differ between ISA types?
The arithmetic is the same for every ISA. What differs is where the rate comes from.
- Cash ISA. The provider sets the rate, which may be fixed for a term or variable. Interest may be added monthly, quarterly or yearly depending on the provider, and later interest is worked out on the growing total. The Cash ISA calculator models different rates and payment patterns.
- Stocks and Shares ISA. There is no interest rate as such. Returns come from changes in the value of investments and from income, and gov.uk lists what a stocks and shares ISA can include, such as company shares, investment funds and bonds. A calculator uses an assumed annual rate, and actual returns vary from year to year and can be negative. The Stocks and Shares ISA calculator takes an assumed rate you choose.
- Lifetime ISA. gov.uk says the government will add a 25% bonus to your savings, up to a maximum of £1,000 per year, and that you can put in up to £4,000 each year (GOV.UK Lifetime ISA guide). The bonus is part of the balance, so in a projection it compounds alongside the rest. The Lifetime ISA calculator shows the bonus within a projection. gov.uk also sets a 25% charge on withdrawals for reasons other than those it lists, covered in the GOV.UK Lifetime ISA guide.
A worked example: starting ten years earlier
Two hypothetical savers, Amy and Ben, each pay £200 at the end of every month into a Stocks and Shares ISA. The assumed growth rate is 6% a year, worked out monthly at one twelfth of 6% (0.5%) a month, with everything reinvested and no charges. The rate is an assumption for the arithmetic, not a forecast.
| Amy | Ben | |
|---|---|---|
| Years of payments | 35 | 25 |
| Total paid in | £84,000 | £60,000 |
| Projected balance at the end | about £285,000 | about £139,000 |
| Of which assumed growth | about £201,000 | about £79,000 |
Amy paid in £24,000 more than Ben, yet her projected balance is about £146,000 higher, roughly double. In this illustration most of that gap comes from the ten extra years of compounding, not from the extra payments. The figures use a simplified model: they do not allow for variable returns, inflation, charges or changes in the monthly amount, and real outcomes would differ.
How can a larger yearly amount change the result?
A calculator can also show what bigger yearly payments add up to. Take an assumed £15,000 paid in at the start of each year for 20 years at an assumed 5% a year. The total paid in is £300,000, and the projected balance is about £521,000, of which about £221,000 is assumed growth. This is an illustration, not a forecast, and not everyone pays in this much.
Any such payments are limited by the allowance. gov.uk says that in the 2026-27 tax year the maximum you can save in ISAs is £20,000, and that you can split the allowance across multiple accounts. For example, the Lifetime ISA limit of £4,000 and the rest of the allowance in a Stocks and Shares ISA would together stay within £20,000.
How much can charges change a compounded result?
Charges are taken from the return, so they compound too. In this illustration, a lump sum of £10,000 grows for 30 years at an assumed 6%, then again at an assumed 5% to stand for the same 6% growth less a 1% annual charge. At 6% the multiple over 30 years is about 5.74, giving about £57,400. At 5% it is about 4.32, giving about £43,200. The result with the charge is about a quarter lower, a gap of about £14,000. Platform fees and fund charges vary by provider, so the real figure depends on what an account charges.
What does a compound interest calculator leave out?
A calculator is a projection tool, not a forecast. It cannot do the following.
- A calculator cannot guarantee returns. Stocks and Shares ISA projections use a fixed annual rate, but real markets move year to year. An average of 6% can hide years of falls and years of gains.
- Allow for inflation. A projected balance of £200,000 in 25 years buys less than £200,000 does today. At an assumed 2% a year of inflation, £200,000 in 25 years would be worth about £122,000 in today's money. Some calculators have an inflation setting.
- Predict provider rates. Cash ISA rates can change, and a variable rate can move at the provider's discretion.
- Reflect life changes. Career breaks, unexpected costs or a change of income can change what is paid in. Calculators model steady payments.
- Replace regulated advice. The result is an illustration of the inputs entered.
What to check when using a compounding calculator
These are points to check, described for information and not as recommendations.
- The inputs. Starting balance, regular payment, assumed rate, number of years and how often growth is added.
- More than one rate. A lower, a middle and a higher assumed rate show how far the answer depends on the assumption. They are assumptions, not forecasts, and actual returns can be lower, including negative.
- Charges. Whether the rate entered is before or after platform and fund charges.
- The allowance. Payments across all ISAs in a tax year are limited to £20,000 (GOV.UK).
- Access. gov.uk says you can take your money out of an ISA at any time without losing any tax benefits, but money taken out no longer compounds, and account terms and the Lifetime ISA charge may apply.
- When to update. A projection can be re-run when the rate, the payments or the plan change.
For one scenario at a time, the free ISA Calculator is available without sign-up. For several ISA types over several years, the Advanced ISA Planner is a one-off purchase of £14.99.
Frequently asked questions
What is compound interest in an ISA?
It is growth that is added to the balance and then earns growth itself in later periods. gov.uk says you do not need to declare any ISA interest, income or capital gains on a tax return, so the full assumed return is left to compound in a calculator.
Does compounding work the same way in a Cash ISA and a Stocks and Shares ISA?
The arithmetic is the same, but the rate differs. A Cash ISA pays a rate set by the provider, while a Stocks and Shares ISA has no guaranteed rate, so a calculator uses an assumed rate and actual returns can be lower, including negative.
How much difference can starting ten years earlier make?
In this guide's illustration, £200 a month at an assumed 6% for 35 years comes to about £285,000, against about £139,000 for 25 years, although only £24,000 more was paid in. It is an illustration, not a forecast.
How often is interest compounded in an ISA?
It depends on the provider, which may add interest monthly, quarterly or yearly. At an assumed 4% a year on £10,000, adding interest once gives £400 in a year, and adding it monthly gives about £407.
This guide does not constitute financial advice. Your personal situation, tax position, and savings goals may mean different strategies are appropriate. Consider speaking to a regulated financial adviser if you are uncertain.
