Best Savings Rates For Lump Sum ISA

Compound Interest Formula:

\[ FV = P \times (1 + \frac{r}{n})^{(n \times t)} \]

Lump Sum Principal (P):

Annual Interest Rate (r):

Compounding Frequency (n):

Time Period (t):

years

Future Value (FV):

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1. What is the Compound Interest Formula?

The compound interest formula calculates the future value of an investment or savings account where interest is earned on both the initial principal and the accumulated interest from previous periods. This powerful mathematical concept allows your money to grow exponentially over time.

2. How Does the Calculator Work?

The calculator uses the compound interest formula:

\[ FV = P \times (1 + \frac{r}{n})^{(n \times t)} \]

Where:

\( FV \) — Future value of the investment (£)
\( P \) — Principal investment amount (£)
\( r \) — Annual interest rate (decimal)
\( n \) — Number of compounding periods per year
\( t \) — Time the money is invested for (years)

Explanation: The formula accounts for how frequently interest is compounded, with more frequent compounding resulting in higher returns over time.

3. Importance of ISA Savings

Details: Individual Savings Accounts (ISAs) offer tax-free savings and investments in the UK. With current best rates up to 4.38% (as of September 2025), ISAs provide an excellent opportunity for tax-efficient wealth growth through compound interest.

4. Using the Calculator

Tips: Enter your lump sum investment amount, the annual interest rate (default set to 4.38% based on current best rates), select compounding frequency, and investment period. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is the current best ISA rate available?
A: As of September 2025, the best savings rates for lump sum ISAs are up to 4.38% according to MoneySavingExpert.

Q2: How does compounding frequency affect returns?
A: More frequent compounding (daily vs annually) results in higher returns due to interest being calculated and added to the principal more often.

Q3: Are ISA earnings really tax-free?
A: Yes, any interest, dividends, or capital gains earned within an ISA are completely free from UK income tax and capital gains tax.

Q4: What's the ISA allowance for the current tax year?
A: For the 2025-2026 tax year, the ISA allowance is £20,000, which can be split between different types of ISAs.

Q5: Can I withdraw money from my ISA?
A: Yes, you can withdraw money from most ISAs at any time, though some fixed-term accounts may have withdrawal restrictions or penalties.