What is the UK ISA?
An ISA (Individual Savings Account) shelters everything inside it from UK tax — no Capital Gains Tax, no Dividend Tax, no Income Tax on interest. The annual allowance is £20,000 across all ISA types combined.
With the CGT annual exemption cut to just £3,000 and dividend allowance to £500, the ISA wrapper has become dramatically more valuable than it was a few years ago.
Formula & worked example
CGT avoided = (growth − £3,000 exemption) × CGT rate
Worked example: £12,000 a year for 20 years at 7%, starting from £25,000 → roughly £623,000 entirely tax-free. Of that, about £358,000 is growth. Outside an ISA, that gain would face around £85,000 of Capital Gains Tax at 24%.
How to use this uk isa calculator
- Enter your annual contribution, up to the £20,000 allowance.
- Add your existing ISA balance.
- Use 5–7% for a diversified equity portfolio after charges.
- Set your CGT rate — 18% basic rate, 24% higher rate.
Smart tips
- The £20,000 allowance is use-it-or-lose-it — it does not roll over to the next tax year.
- A Stocks & Shares ISA beats a Cash ISA over long horizons; cash rarely outpaces inflation after tax.
- You can now hold multiple ISAs of the same type with different providers in one tax year.
- A Lifetime ISA adds a 25% government bonus for a first home or retirement, but carries withdrawal penalties.
- Transfer old ISAs rather than withdrawing and re-subscribing, which would waste your allowance.
Frequently asked questions
What is the ISA allowance for 2026?
£20,000 per tax year across all ISA types combined — Cash, Stocks & Shares, Innovative Finance and Lifetime ISA.
Do I pay tax on ISA withdrawals?
No. Withdrawals are completely tax-free and do not need to be declared on a tax return.
Cash ISA or Stocks & Shares ISA?
Cash for money you need within five years. Stocks & Shares for longer horizons, where equity returns typically far outpace cash.
Can I have more than one ISA?
Yes. Since April 2024 you can pay into multiple ISAs of the same type in one tax year, provided you stay within the £20,000 total.
Want the theory behind the numbers? Read our UK investing guides on the Money Blog.
Written by Gurjeet Singh, Sharpen Solutions. Last reviewed 15 Oct 2026. Sources: GOV.UK — Individual Savings Accounts: the annual allowance, GOV.UK — Lifetime ISA: £4,000 limit and the 25% bonus, GOV.UK — Capital Gains Tax allowances and rates, GOV.UK — Tax on dividends: allowance and rates. How we check these numbers.