See how your savings grow with compound interest — UK
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Savings Growth Projection
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💰 The ISA allowance for 2026/27 is £20,000 per year. Interest earned inside an ISA is tax-free. The Personal Savings Allowance outside an ISA is £500 (higher rate) or £1,000 (basic rate).
How Compound Interest Works
Compound interest means you earn interest on your interest, not just on the original deposit. Over long periods this creates exponential growth. Starting early — even with small amounts — has a dramatic effect on the final balance.
Cash ISA vs Stocks & Shares ISA
Cash ISA — works like a savings account. Your money is protected and earns a fixed or variable interest rate. Returns are lower but capital is safe. Stocks & Shares ISA — invested in markets. Higher potential returns over the long term but capital is at risk. Historically UK stocks have returned around 7% per year over the long term.
ISA Allowance 2026/27
You can save up to £20,000 per tax year into ISAs. This can be split across a cash ISA, stocks & shares ISA, innovative finance ISA and Lifetime ISA (LISA). The LISA allows up to £4,000 per year with a 25% government bonus.
Best Savings Rates 2026
With the Bank of England base rate at elevated levels, savings rates have improved significantly. Easy access accounts are offering around 4–5%, with fixed-rate bonds offering slightly more for longer terms. Always compare rates across providers using comparison sites.
Frequently Asked Questions
The overall ISA allowance is £20,000 per person for 2026/27, which can be split across a Cash ISA, Stocks & Shares ISA, Innovative Finance ISA and Lifetime ISA (LISA) in any combination, subject to the LISA's own £4,000 sub-limit.
Outside an ISA, basic rate taxpayers can earn £1,000 of savings interest tax-free per year; higher rate taxpayers get £500; additional rate taxpayers get no Personal Savings Allowance at all.
Compound interest means you earn interest not only on your original deposit but also on the interest already added in previous periods. Over long time horizons, this compounding effect can meaningfully outperform simple interest on the same rate.
A Cash ISA suits shorter time horizons and lower risk tolerance, with guaranteed (though currently modest) returns. A Stocks & Shares ISA carries investment risk and can fall in value, but has historically offered higher returns over longer periods (typically 5+ years). The right choice depends on your goals and risk appetite.
A LISA lets you save up to £4,000 a year (counting towards your £20,000 total ISA allowance) towards a first home or retirement, with the government adding a 25% bonus on top — up to £1,000 a year. Withdrawals for other purposes before age 60 usually incur a 25% government penalty.