ISA calculator
What a tax-free savings wrapper is worth against the same money held in a taxable account.
Extra after 15 years in an ISA
Estimate$42,455
33,711 of tax avoided at the higher rate
- ISA balance
- $300,521
- Taxable account balance
- $258,066
- Annual ISA allowance
- $20,000
| Contributed each year | $12,000 |
|---|---|
| Personal savings allowance | $500.00 |
| Tax paid outside an ISA | -$33,711 |
| ISA balance | $300,521 |
| ISA advantage | $42,455 |
- The allowance is £20,000 a year and does not carry forward if unused.
- Your personal savings allowance shelters the first £500 of interest a year outside an ISA.
A higher-rate taxpayer gets only £500 of savings allowance a year, so at 5% a £20,000 balance already exceeds it and the excess is taxed annually.
Side by side
How this is calculated
Tax on interest costs more than the tax
Money taken in tax each year never compounds again. Over 15 years at 5% that lost growth is worth more than the tax paid, which is why the wrapper advantage accelerates rather than staying flat.
taxable interest = interest − tax-free allowanceAllowances usually shrink as income rises
In the UK the savings allowance is £1,000 at the basic rate, £500 at the higher rate and nothing at the additional rate — so the wrapper is worth most to the people with the least sheltering elsewhere.
Annual allowances rarely carry forward
The £20,000 UK subscription limit resets each tax year and unused room is lost, so contributing regularly is worth more than saving up to contribute later.
Worked example: £20,000 saved, £12,000 a year at 5%
| Already saved | £20,000 |
|---|---|
| Paying in | £12,000 a year |
| Return | 5% |
| Allowance | £20,000 a year |
|---|---|
| Tax outside | At your marginal rate |
Wrapper rules and allowances differ by country. Pick a country above for the limits that apply to you.
What this assumes
- A constant return for the whole period.
- Contributions within the annual allowance.
- Returns reinvested rather than withdrawn.
- No account fees.
Where this commonly goes wrong
- Withdrawing and re-depositing usually destroys the tax wrapper and consumes fresh allowance — use the provider transfer process instead.
- Some accounts let you replace a withdrawal within the same year without using allowance; most do not, and the difference is rarely advertised.
- Introductory rates on cash accounts inside a wrapper expire like any other, so the tax benefit can be outweighed by a poor rate.
Questions
How much can I put in a tax-free savings wrapper?
In the UK, £20,000 a tax year across all ISAs. The allowance resets annually and unused room is lost rather than carried forward, so missing a year cannot be made up later.
Is a tax-free wrapper worth it on a small balance?
It depends on your marginal rate. A UK higher-rate taxpayer only gets £500 of tax-free interest outside the wrapper, which at 5% is reached with a £10,000 balance — everything beyond is taxed at 40%.
Why does the advantage grow over time?
Because tax taken each year is money that never compounds again. The gap between a sheltered and unsheltered account widens with every year, so the benefit is far larger over 15 years than over three.
Related tools
Sources
General estimate based on published HMRC rates for the current period. Not tax advice. Confirm your position with HMRC or a qualified adviser.
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