Should you use an ISA or a regular savings account? Enter your details to compare after-tax returns and find the optimal split.
You can put up to £20,000 in ISAs this tax year (2025/26). ISA interest is completely tax-free and does not count towards your PSA.
Net annual return after tax
Optimal split gives the best after-tax return of £1,242.65 — that is £22.65 more than the next best option (All non-ISA).
Crossover point
At your current rates, the ISA becomes the better choice once your total savings exceed £57,100.00. Below that amount, the higher non-ISA rate earns more even after tax, because your interest stays within your Personal Savings Allowance.
This is for guidance only — not financial or tax advice. ISA rules may change. Your actual returns will depend on your specific rates and tax position. Consult a financial adviser for personalised guidance.
ISAs typically offer slightly lower rates than the best non-ISA savings accounts. However, ISA interest is completely tax-free, while non-ISA interest that exceeds your Personal Savings Allowance (PSA) is taxed at your marginal rate.
The key question is: does the tax saving from an ISA outweigh the lower interest rate? The answer depends on three factors:
For many savers, the optimal strategy is a split: keep enough in a non-ISA account so that your interest stays within your PSA (earning the higher rate tax-free), and put the rest in an ISA. Our calculator shows you exactly how to split your savings.
You can put up to £20,000 into ISAs each tax year (2025/26). This includes Cash ISAs, Stocks & Shares ISAs, and Lifetime ISAs combined. Our calculator accounts for this cap when working out the optimal split. If your savings exceed £20,000, the excess must go into a non-ISA account.
Yes. You can transfer savings from a non-ISA account into an ISA, but the transfer counts towards your annual £20,000 ISA allowance for the current tax year. Transfers between ISAs from previous years do not use up your current allowance. Contact your ISA provider to arrange a transfer — do not withdraw and redeposit, as this uses your allowance.
Flexible ISAs let you withdraw and replace money within the same tax year without it counting towards your annual allowance. Not all ISAs are flexible, so check with your provider. This is useful if you might need access to your savings during the year but want to maintain your ISA tax benefit.
No. ISA interest is completely tax-free and does not need to be declared on your tax return. It does not count towards your Personal Savings Allowance either. Only interest from non-ISA accounts needs to be reported if it exceeds your PSA.
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