Your savings plan
Tax treatment
Projected outcome
Growth over time
Figures are for the 2026/27 tax year (England, Wales and Northern Ireland; the Personal Savings Allowance uses these bands even for Scottish taxpayers). Interest is compounded monthly and tax on a taxable account is applied each year to interest above your Personal Savings Allowance, then deducted from the balance. The ISA allowance is £20,000 per tax year. This is a projection based on a constant interest rate, which real savings and investments will not have. It ignores inflation and the savings starting rate, and is a general guide only, not financial advice.
Explanation
How compound interest works
Compound interest is interest earned on your interest.
Each period, the interest you receive is added to your balance, and the next period’s interest is calculated on that larger amount.
Over long periods this snowball effect becomes powerful, which is why the gap between what you pay in and what you end up with widens over time, as the graph above shows.
Starting earlier and leaving the money invested for longer makes a far bigger difference than most people expect.
Why the tax setting matters
Interest earned in a normal savings account is taxable.
The Personal Savings Allowance lets basic-rate taxpayers earn £1,000 of interest tax-free each year, higher-rate taxpayers £500, and additional-rate taxpayers nothing.
Once your interest exceeds that allowance, the excess is taxed at your normal income tax rate.
Inside an ISA, by contrast, all interest is completely tax-free and never touches your allowance, which is why the same savings plan can end up worth noticeably more in an ISA.
You can pay up to £20,000 into a stocks and shares ISA or £12,000 into a Cash ISA each year.
Things this calculator simplifies
Real savings rates change over time, whereas this projection assumes a constant rate, so treat the result as an illustration rather than a guarantee.
It also doesn’t adjust for inflation, so the future figure will buy less than the same amount today.
It doesn’t account for the savings starting rate (which helps people with low non-savings income), and it assumes tax on a taxable account is settled each year rather than via your tax code.
Important: This is a general guide for the 2026/27 tax year and does not constitute financial advice. Investment returns are not guaranteed, and the value of stocks-and-shares investments can fall as well as rise. Speak to a qualified financial adviser before making decisions.