What is the ISA allowance for 2026/27?

The annual ISA allowance is £20,000. You can split this between a cash ISA and stocks & shares ISA. Any growth within the ISA is completely tax-free.

Are the returns in this calculator realistic for UK investors?

The default 7% represents a typical long-term average for a diversified global equity portfolio. Cash savings typically return less (4–5%). Use the rate slider to model your specific situation.

Should I use a cash ISA or stocks & shares ISA?

For short-term goals (under 5 years), a cash ISA is safer. For long-term growth (5+ years), a stocks & shares ISA has historically delivered significantly better returns despite short-term volatility.

How often should interest compound?

More frequent compounding (monthly or daily vs yearly) gives slightly better results, but the difference is usually small. Most savings accounts compound daily, while investments like index funds compound based on market returns.

Should I account for inflation?

Yes. Inflation erodes purchasing power over time. Use the Advanced Settings to add an inflation rate (2–3% is typical for the UK) to see your results in today's money. This gives a more realistic picture of future wealth.

What's the best strategy for compound growth?

Start early, contribute consistently, and let time do the work. Even small amounts grow significantly over decades. Increasing your contributions by a small percentage each year (use Advanced Settings) can dramatically boost your final balance.

CompoundWise

Turn £500/month into £410,761

Free UK calculator · No signup · Based on ISA investing

By CompoundWise Team·Updated April 2026

Starting amount

£0£20k£200k

Monthly contribution

£0£1k£5k

Expected annual return

Time horizon

yrs

Invest £500/month for 25 years at 7%

£259,761

earned in interest alone

That's more than you put in, your money earns money

Total value

£410,761

You put in

£151,000

Your money63% from compounding

To reach £410,761, most UK investors use a Stocks & Shares ISA

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Keeping this in a savings account? You'd have ~£151,088 less

Compared to investing at 7% vs a 4% cash savings account

Growth Over Time

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Quick Scenarios

Your Personalised Insights

Year 18: your interest overtakes your contributions. From here, compounding does the heavy lifting.
Your money earns ~£28/day in interest. That's £259,761 earned while you sleep.
Saving just £50 more per month would add £40,504 to your final balance. That's £15,000 invested for £40,504 extra.
5 more years would add £207,341, nearly 50% more, showing how powerful time is.
Starting 5 years earlier would add £146,259 to your final balance. Every year you wait costs real money.Start investing now →
Consistency beats timing, investing £500/month for 25 years matters more than picking the perfect moment to start.
At your current plan, you reach £250k in 20 years. That's a real milestone, and it compounds from there.Start building towards it →

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By the CompoundWise Team · Updated April 2026

UK-based financial education · Not financial advice

Compound interest for UK investors

UK investors benefit from tax-efficient wrappers like the stocks & shares ISA, where all growth is completely tax-free. The annual ISA allowance for 2026/27 is £20,000, which is up to £1,666 per month. If you maximise your ISA contributions and invest in a diversified portfolio returning 6–8% annually, compound interest can turn consistent saving into significant long-term wealth.

ISA vs general investment account

In a stocks & shares ISA, you pay no capital gains tax and no tax on dividends. In a general investment account (GIA), you'll pay CGT on gains above £3,000 and income tax on dividends above £500. For most UK investors, maximising your ISA before using a GIA makes the most sense. This calculator shows pre-tax growth, which matches ISA returns exactly.

What returns can UK investors expect?

A globally diversified index fund has historically returned around 7–10% per year before inflation. UK-focused funds may differ slightly. Cash ISAs currently offer 4–5% but historically lag equity returns over longer periods. Use the rate slider above to model different assumptions and find what works for your timeline.

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