How does a stocks and shares ISA grow tax-free?

Inside a stocks and shares ISA, all investment growth, dividends, and interest are completely free from income tax and capital gains tax. You pay no tax when you withdraw, unlike a pension. This makes ISAs particularly powerful for medium- to long-term investing, as compound growth is not eroded by annual tax charges.

What returns can I expect from a stocks and shares ISA?

Returns depend entirely on what you invest in. Globally diversified index funds have historically returned around 7–10% per year (gross, before charges) over the long term, though this is not guaranteed and past performance does not predict future returns. A more conservative assumption of 5–6% is often used for planning purposes. This calculator lets you choose your own growth rate.

Can I withdraw money from a stocks and shares ISA?

Yes. Unlike a pension, you can withdraw from a stocks and shares ISA at any time with no tax to pay. If your ISA is flexible, you can also re-deposit withdrawn amounts in the same tax year without it counting toward your £20,000 allowance. Not all ISAs are flexible, check with your provider.

What is the difference between a cash ISA and a stocks and shares ISA?

A cash ISA holds savings in cash and earns interest, it is low risk but typically lower return. A stocks and shares ISA invests in assets such as shares, bonds, and funds, higher potential return but with investment risk and capital at risk. For long-term goals (10+ years), stocks and shares ISAs have historically outperformed cash ISAs significantly.

Can I transfer my cash ISA to a stocks and shares ISA?

Yes. You can transfer existing ISA savings, including cash ISAs, to a stocks and shares ISA without losing the tax-free status or using any of your current year's allowance. The transfer must go directly between providers; withdrawing the cash and re-investing it would use your annual allowance.

Updated 6 April 2026

Stocks and Shares ISA Calculator · Free UK 2026/27

Project your tax-free ISA growth with lump sum investments and monthly contributions. ISA allowance: £20,000/year for 2026/27.

✓ Free to use✓ £20,000 ISA allowance✓ Compound growth✓ Instant projection

Stocks and Shares ISA Calculator

Enter lump sum, monthly contributions, growth rate, and years. Projection appears instantly

Lump sum (£)

Monthly contribution (£)

Annual growth rate (%)

Investment term (years)

Projected ISA value

£284,669.80

After 20 years, £130,000.00 contributed, £154,669.80 tax-free growth

Total contributions

£130,000.00

Growth on lump sum

£28,696.84

Growth on contributions

£125,972.95

Total tax-free growth

£154,669.80

Projected ISA value

£284,669.80

Projections assume a constant annual growth rate. Capital at risk, investment returns are not guaranteed. Past performance does not predict future results. Tax rules may change.

How the Stocks and Shares ISA Calculator Works

Quick Answer: A stocks and shares ISA grows tax-free, no income tax on dividends, no capital gains tax on profits. The 2026/27 annual allowance is £20,000. With a £10,000 lump sum, £500/month, and 7% annual growth over 20 years, you could build a pot of approximately £285,000.

The Power of Tax-Free Compounding

Because growth inside an ISA is not taxed each year, your entire return compounds, rather than being eroded by income tax on dividends or capital gains tax on growth. Over 20–30 years, this tax-free compounding can add tens of thousands of pounds compared to an equivalent taxable investment account.

Formula

FV = P(1+r)^n + C × [(1+r)^n − 1] / r

P = lump sum | C = monthly contribution × 12 | r = annual rate | n = years

Worked Example, £10,000 lump sum + £500/month at 7% for 20 years

Lump sum invested£10,000

Monthly contribution£500

Annual growth rate7%

Investment horizon20 years

Total contributions£130,000

Projected ISA value~£285,000

Past performance does not guarantee future returns. Capital at risk. Tax rules may change.

Frequently Asked Questions

The stocks and shares ISA allowance for 2026/27 is £20,000 per person per tax year. This is the same as in 2025/26. The £20,000 can be split across different ISA types in the same tax year, for example, £10,000 in a cash ISA and £10,000 in a stocks and shares ISA. Unused allowance cannot be carried forward.