An ISA (Individual Savings Account) is a tax-efficient way to save or invest money in the UK. When considering returns on an ISA, you’ll typically choose between fixed-rate and variable-rate interest options. Let’s break down how to calculate returns for each. For more information please visit Calculate ISA Interest Fixed-Rate ISA Returns A fixed-rate ISA locks in an interest rate for a set period (e.g., 1, 3, or 5 years). Your interest earnings are predictable and do not change with market fluctuations. Formula for Fixed-Rate ISA Returns A=P×(1+r)tA = P \times (1 + r)^tA=P×(1+r)t Where: Example Calculation A=5000×(1+0.04)3A = 5000 \times (1 + 0.04)^3A=5000×(1+0.04)3A=5000×(1.1248)=£5,624A = 5000 \times (1.1248) = £5,624A=5000×(1.1248)=£5,624 After 3 years, you will have £5,624, earning £624 in interest. Variable-Rate ISA Returns A variable-rate ISA has an interest rate that can change over time, depending on the market or the provider’s terms. Since rates fluctuate, calculating future returns is uncertain. However, if you assume a changing rate each year, you can estimate potential returns. Formula for Variable-Rate ISA Returns For varying rates across years:A=P×(1+r1)×(1+r2)×…×(1+rn)A = P \times (1 + r_1) \times (1 + r_2) \times … \times (1 + r_n)A=P×(1+r1)×(1+r2)×…×(1+rn) Where r1,r2,…rnr_1, r_2, … r_nr1,r2,…rn are the different […]
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