Every April, the question turns up at some point: what is this cash ISA actually doing for me?
It’s usually triggered by the same thing. A statement lands, a transfer is made, an end-of-tax-year list of things to do crosses the kitchen counter. The balance ticks up by a known amount each year. The interest gets paid. The wrapper sits there doing its job. And the question of what does this look like in ten years never quite gets answered, because the answer depends on a chain of assumptions that nobody walks through in one sitting.
This piece walks through it. Verdly publishes for education, not financial advice; speak to a regulated adviser before making decisions specific to your situation. What follows is a model, not a recommendation: the same £20,000 input run through three different rate assumptions, and then the same model run outside the wrapper at the savings tax rates that apply from April 2027.
The setup
Take a clean example. Someone puts £20,000 into a cash ISA on 6 April 2026, the first day of the current tax year. They don’t add anything else. They don’t withdraw. The balance is left in a fixed-rate cash ISA at a single provider, with interest paid annually and reinvested. Ten years on, what’s there?
That’s the question. The answer depends entirely on the rate.
Layer 1: the current rate
Best-buy one-year fixed cash ISAs in May 2026 sit between 4.1% and 4.66% AER. For a clean working figure, call it 4%. Most people won’t hit 4.66% across a full ten-year stretch. Fixed-rate deals end, rates drift, the best-buy spot rotates. But 4% is a defensible mid-case.
At 4% compounded annually, £20,000 grows to:
| Year | Balance |
|---|---|
| Year 0 | £20,000 |
| Year 1 | £20,800 |
| Year 3 | £22,497 |
| Year 5 | £24,333 |
| Year 7 | £26,319 |
| Year 10 | £29,605 |
So £20,000 becomes roughly £29,600. A gain of just under £9,600 across the decade. The compounding is doing real work: in year 10 alone, the interest earned is about £1,140, compared to £800 in year 1.
This is the figure the calculators on ISA.co.uk, Hargreaves Lansdown and J.P. Morgan Personal Investing produce. They stop there. But that figure assumes the rate stays at 4% for ten consecutive years, which is the assumption least likely to hold.
Layer 2: the long-run average
The best available read on what cash ISAs have actually paid over the long term comes from Moneyfacts’ long-run average data. Across the last decade, the average UK cash ISA paid closer to 1.2% to 1.8% AER. The current 4% range is unusual by historic standards; the Bank of England held Bank Rate at 3.75% on 30 April 2026, and rates haven’t been this high for sustained periods in living memory.
At a 1.5% average, the midpoint of the Moneyfacts range, the same £20,000 grows to:
| Year | Balance |
|---|---|
| Year 0 | £20,000 |
| Year 5 | £21,546 |
| Year 10 | £23,210 |
£23,200. A gain of £3,200 across the decade.
The difference between the two scenarios isn’t small. £6,400 separates the 4% case from the 1.5% case over ten years on the same £20,000 deposit. That gap is what rate volatility actually costs, and it’s the gap most calculators don’t show, because they ask the saver to pick a single rate up front.
The honest version sits somewhere between the two. Cash ISA rates have been climbing since 2022, plateaued through 2025, and started to drift as the Bank of England considered cuts. A reasonable working assumption is that the rate over the next decade lies between today’s 4% and the historic 1.5%, weighted by how long current conditions persist.
Layer 3: what the money is actually worth
Both figures above are nominal. They describe what the balance will read on the screen. They don’t describe what the balance will buy.
CPI inflation in the UK ran at 3.3% in the period referenced by the Bank of England’s April 2026 monetary policy decision. If that rate held for a decade (it won’t, but the Bank’s 2% target has been undershot or overshot for almost every recent year), the real return on a 4% cash ISA is closer to 0.7% per year.
At 0.7% real growth, £20,000 buys, in today’s money, around £21,400 at the end of ten years. The screen reads £29,600. The actual purchasing power has barely moved.
At 1.5% nominal against 3.3% CPI, the real return is negative. £20,000 loses ground in purchasing-power terms even as the screen ticks up: a real-terms balance of around £16,700 at the end of ten years, despite a nominal balance of £23,200.
A caveat worth flagging. CPI is the national basket the ONS tracks. The basket any particular household buys looks different. Households that spend a higher share on energy or food felt a noticeably higher personal inflation rate than CPI in 2022 and 2023, when both spiked. The 0.7% real figure is built on the national number; the lived experience for any one household sits somewhere either side of it.
This is the bit calculators don’t show, and the bit that matters most when someone holds cash over a long horizon. The wrapper protects the nominal growth from tax. It doesn’t protect the purchasing power from inflation. With the published ONS index, the same restatement can be applied to a whole net worth record.
What’s actually happening behind the deposits
Cash ISAs aren’t gathering dust. The opposite. HMRC’s Annual Savings Statistics 2025 showed cash ISA subscriptions grew by around 125% between the 2021/22 and 2023/24 tax years, while stocks and shares ISA subscriptions fell by around 9% over the same window. The average cash ISA balance reached about £26,900 by April 2024. The average annual subscription sat near £7,000.
That’s a behavioural pattern, not a coincidence. After 2022, savings rates climbed sharply and instant-access yields hit headlines. Cash felt like the rational place to be, especially for households that had watched stocks-and-shares balances move sideways or down. Money flowed in. The cash ISA, dormant for most of the 2010s, became the workhorse wrapper.
The Treasury noticed.
What changes in April 2027
In the Autumn Budget 2025, the Chancellor announced a cut to the cash ISA limit: from 6 April 2027, anyone under 65 would be able to put only £12,000 a year into cash, inside an unchanged £20,000 overall allowance. It won’t now go ahead. Budget 2026, on 28 October 2026, reversed it, and the government will keep the cash ISA limit at £20,000 from April 2027. As at 30 October 2026 that reversal still needs the secondary legislation the Treasury plans to lay before Parliament in November.
So the £20,000 input in every table above is still the input from April 2027 onwards.
What does change on that date is the tax on interest earned outside the wrapper. Budget 2025 raised the rates on savings income by two percentage points from April 2027, and Budget 2026 added two more, so from 6 April 2027 the savings basic, higher and additional rates are 24%, 44% and 49%. The personal savings allowance doesn’t move: the first £1,000 of interest a year is untaxed for a basic-rate taxpayer, £500 for a higher-rate taxpayer, and nothing for an additional-rate one.
The model, run outside the wrapper
Put the 4% case through those rates. The same £20,000, the same ten years, but held in an ordinary savings account, with tax taken from each year’s interest before it compounds. This assumes the 2027/28 rates hold for all ten years and that no other savings are using up the allowance.
| Tax band | Inside the ISA | Outside it | Gap |
|---|---|---|---|
| Basic rate | £29,605 | £29,531 | £74 |
| Higher rate | £29,605 | £27,395 | £2,210 |
| Additional rate | £29,605 | £24,476 | £5,129 |
For a basic-rate taxpayer the wrapper barely registers. Annual interest stays under the £1,000 allowance until year seven, so for most of the decade there’s no tax to shelter. The allowance does far less at the higher rate, and at the additional rate there isn’t one: every pound of interest is taxed at 49%, and the gap is more than half of the £9,605 the deposit earns inside the ISA.
The wrapper as a finite slot
This is where the framing usually shifts.
For a typical saver, a cash ISA is close to unlimited. HMRC’s data puts the average annual cash ISA subscription at around £7,000, about a third of the allowance, and very few people have £20,000 a year of new cash to wrap.
It still has a ceiling, though, and that makes it behave like a slot rather than a default. Each tax year that passes uses up that year’s allowance, and the allowance doesn’t roll forward. A slot used for short-term cash that earns a thin rate is a slot that can’t be reused later for something with more time to compound.
That’s a different way to think about what the wrapper is for. Not as a labelled jar for whatever cash happens to be sitting around, but as a finite annual quota that has a long-term tax value attached to it. Money deposited this year and held for thirty years compounds tax-free at whatever rate the underlying asset earns. The table above shows what the same money loses outside it over just ten, and the loss grows with the tax band.
The maths of which asset belongs in the wrapper is a separate question, and one that depends entirely on individual circumstances. The framing that matters here is that the wrapper is a constrained resource, and that from April 2027 the gap between inside and outside it is wider than it has been.
The bigger picture
The figure on the screen tells one story. The figure in today’s money tells another. The figure outside the wrapper tells a third. None of them is the only number that matters, because the cash ISA doesn’t exist in isolation; it’s one component of a household balance sheet that includes pensions, property, other investments, and outright debt. What the cash is doing for the household depends on all of those.
That’s the part a single-rate calculator can’t model. It’s also the question that gets harder to answer with each tax year that adds a new layer to the picture. The starting point is knowing what cash itself does. The next step is fitting it into the wider view of what counts in a household’s net worth, recorded at intervals you can actually compare and what the path looks like over a longer horizon than ten years.
Last reviewed 30 October 2026.
