ISA vs SIPP Calculator

The ISA versus SIPP question gets asked every January and answered badly in the personal-finance press almost every time. It is rarely a one-or-the-other decision. It is a question of timing, marginal rates and when you actually need the cash. The ISA vs SIPP calculator runs the after-tax maths for you, so you can see in pounds what each wrapper could hand back after 20, 30 or 40 years under the assumptions you enter.

This guide explains what the calculator is doing under the bonnet, walks through a worked higher-rate example, and lays out a hybrid pattern often used by UK workers under the 2026/27 rules. It is general information, not personal advice; for a recommendation tailored to your circumstances, speak to an FCA-regulated adviser.

Contents

• The real difference: when tax is paid, when access is granted
• How to use the calculator
• Worked example: £10,000 spare, higher-rate taxpayer
• The decision framework: rate now versus rate later
• The hybrid strategy almost everyone should run

The real difference: when tax is paid, when access is granted {#the-real-difference}

An ISA and a SIPP both shelter your investments from income tax, dividend tax and capital gains tax while the money is inside. That is where the similarity ends. The two wrappers differ on three axes that decide the answer for you.

When tax is paid. ISA contributions come from post-tax income. You earned £10,000 gross, paid your marginal rate of income tax and National Insurance, and then put what was left into the ISA. SIPP contributions go the other way. You contribute gross, HMRC adds 20% relief at source, and higher and additional-rate taxpayers claim the rest through self-assessment. The exit is the mirror image: ISA withdrawals are tax-free at any age, SIPP withdrawals give you 25% tax-free (capped at the £268,275 Lump Sum Allowance) and tax the remaining 75% as income at your retirement marginal rate.

When access is granted. The ISA is liquid from the day the cash settles. You could pull it out at 22 to buy a flat, at 45 to cover a redundancy, at 60 to bridge to State Pension age. The SIPP locks until age 55, rising to 57 from 6 April 2028, with very limited exceptions (such as serious ill health). The State Pension currently starts at 66 (rising to 67 between 2026 and 2028 under current legislation), so anyone targeting early retirement typically needs accessible savings (such as an ISA) to cover the bridge years.

What happens at death. The ISA forms part of your estate and may be subject to inheritance tax, though an Additional Permitted Subscription lets a surviving spouse inherit the wrapper itself. The SIPP currently sits outside your estate and passes to nominated beneficiaries, though Autumn Budget 2024 announced that unused pension funds will be brought inside IHT from April 2027. Both still beat a General Investment Account, where every gain above the £3,000 CGT allowance is taxable.

How to use the calculator {#how-to-use-the-calculator}

The ISA vs SIPP calculator compares the same gross contribution flowing into each wrapper across the same time horizon, then shows you the after-tax value at retirement in today's money.

1. Enter your annual gross contribution

This is the pre-tax amount you are willing to commit each year. The calculator treats the same gross figure as the input for both paths, so the comparison is apples-to-apples. The SIPP takes the full gross figure via tax relief. The ISA takes what is left after income tax at your current rate.

2. Pick your current tax rate

Use 20% if you are a basic-rate earner, 40% if higher-rate, 45% if additional-rate. If you are in the £100,000 to £125,140 personal-allowance taper band, your effective rate is closer to 60%, but the calculator caps the slider at 45%. Run the 60% tax trap calculator in a second tab to size the bigger prize.

3. Pick your retirement tax rate

Most retirees drop a band. State Pension plus a £15,000 to £20,000 drawdown usually lands a comfortable household firmly in the 20% band. Pick 20% if that sounds like you. If you expect a defined-benefit pension, rental income or a still-active business in retirement, pick higher.

4. Years to retirement and real return

Years is straightforward. Real return is the annualised growth rate after inflation. Five percent is one commonly cited long-run assumption for diversified global equities, but past performance is not a guide to future returns and your own assumption may differ; the compound interest calculator lets you sanity-check the impact of changing it.

5. Toggle the 25% tax-free lump sum

The default is on, because almost every SIPP holder takes the lump sum. Turn it off only if you are modelling something unusual, such as a very large pot crashing into the Lump Sum Allowance.

The result panel shows the winner in pounds, the gross SIPP pot, the lump sum, the tax paid on the taxable element and the net annual contribution the ISA path actually represents. The numbers update as you change the inputs.

Worked example: £10,000 spare, higher-rate taxpayer {#worked-example}

This is an illustrative example only, not a personal recommendation, and uses simplified assumptions. Imagine a 45-year-old higher-rate taxpayer with £10,000 of pre-tax income to commit each year for 20 years. Assumed real return is 5%. Assumed retirement marginal rate is the basic 20% band, which can apply to many higher-rate earners once State Pension and modest drawdown are the main income, though your own retirement tax position may differ.

ISA path. The £10,000 has already been hit by 40% income tax and 2% National Insurance on the upper-band slice, so roughly £5,800 lands in the ISA each year. Twenty years at 5% real grows that to about £202,000 in today's money under these assumptions. Withdrawals are tax-free at any age. Indicative ISA value at retirement: around £202,000.

SIPP path. The full £10,000 gross enters the SIPP. Out of pocket, this costs the saver about £6,000 net (£8,000 after basic-rate relief at source, then a further £2,000 reclaimed via self-assessment, assuming sufficient higher-rate income). In effect, for the same £6,000 of net pay the saver could have put into an ISA, the SIPP path moves £10,000 to work, which is equivalent to turning £10,000 of net into £16,667 of gross buying power. Twenty years at 5% real grows the £10,000 annual contribution to roughly £348,000 gross. Taking 25% as a tax-free element (around £87,000), the remaining £261,000 is taxed at the assumed 20% rate on the way out, leaving roughly £209,000. Plus the tax-free element, the SIPP delivers around £296,000 net under these assumptions.

Under these assumptions the SIPP comes out ahead by roughly £94,000 on the same £6,000 a year of actual out-of-pocket cost. The difference is not because the SIPP grows faster - both wrappers grow tax-free inside. It reflects 40% relief in and a 20% rate out on most of the pot, plus a 25% slice that escapes income tax entirely. Actual returns, tax rates and personal circumstances will vary.

The same pattern tends to hold whenever the current rate is higher than the retirement rate. If the retirement rate is set to 40% the SIPP advantage shrinks, though the 25% tax-free element often keeps it ahead in the model. At 45% the ISA tends to come out ahead in the model.

The decision framework: rate now versus rate later {#the-decision-framework}

Strip out everything else and the after-tax comparison between the two wrappers tends to come down to one piece of arithmetic: your marginal rate now versus your marginal rate in retirement. If your marginal tax rate today is higher than your marginal tax rate in retirement, the SIPP typically comes out ahead in the model. If your retirement rate matches your current rate, the SIPP can still come out ahead by a small margin thanks to the 25% tax-free element. If your retirement rate is higher than your current rate, the ISA typically comes out ahead in the model.

The SIPP tends to come out ahead on the after-tax maths when:

• You are a 40% or 45% taxpayer now and project a 20% band retirement (a common scenario for higher-rate earners).
• You are in the £100k-£125,140 personal-allowance taper, where every £2 of pension contribution recovers £1 of allowance and may also save National Insurance on the upper-band slice via salary sacrifice.
• Your employer offers a contribution match. A workplace match is generally an immediate uplift before any growth or relief, which makes it a major factor in the comparison.

The ISA tends to come out ahead on flexibility when:

• You might need the money before age 57, including for early retirement, redundancy, a house deposit or any large life expense.
• You expect a defined-benefit pension or rental income to push you into a higher tax band in retirement than you sit in today.
• You want the assets to pass to a non-spouse beneficiary outside any future pension IHT rules.

The SIPP is effectively a bet on tax-rate arbitrage. The ISA is a bet on optionality. Both can be reasonable choices; the right mix depends on your own circumstances and is the kind of question a regulated adviser can help with. The SIPP vs workplace pension guide and the Trading 212 SIPP review go deeper on the pension side, and the stocks and shares ISA comparison and SIPPs comparison cover provider options.

A hybrid pattern many UK workers consider {#the-hybrid-strategy}

The single-wrapper question is often the wrong framing. A pattern frequently discussed in UK personal-finance commentary is to split contributions, in a rough priority order, so the outcome does not rely on a single tax-rate guess for 30 years. The order below is general information, not personal advice.

Step 1: Consider the employer pension match first. A 5% match on £40,000 of salary is around £2,000 of extra contributions a year. Most personal-finance commentary suggests securing it before directing further savings between the ISA and SIPP, because the match itself can dwarf the wrapper choice.

Step 2: If you are in the 60% tax trap, the SIPP is worth modelling carefully. Earnings between £100,000 and £125,140 lose £1 of personal allowance for every £2 of income. Pension contributions can reclaim the allowance pound for pound, giving an effective relief rate of roughly 60% to 62% once NI is included. The salary sacrifice optimiser lets you model how much of your own income to redirect.

Step 3: For younger savers, building an accessible ISA buffer is often discussed first. Earning years are long and retirement income is uncertain. Money inside an ISA still compounds tax-free and stays accessible the whole time. A buffer of 3-5 years of expenses inside an ISA is one common target before tilting more heavily into the SIPP.

Step 4: After the bridge ISA is built, many higher-rate savers tilt to the SIPP. Higher-rate earners can get the largest after-tax outcome from SIPP contributions in the model, especially once an ISA bridge is in place. As the access age gets closer, the optionality cost of the SIPP lock-in falls, so the mix can tilt further toward the pension over time.

Step 5: Both annual allowances can be used in parallel where affordable. The £20,000 ISA cap and the £60,000 SIPP annual allowance are separate. Some high savers fill the ISA first up to £20,000, then direct further savings into the SIPP up to the relevant earnings cap. The SIPP annual allowance also tapers for adjusted income over £260,000 down to a minimum of £10,000 at the top end under current HMRC rules.

That ordering reflects the workplace match, the 60% trap band, pre-57 flexibility and the marginal-rate arbitrage. It is also the order the calculator implicitly assumes when you compare a single contribution flowing into one wrapper or the other. Whether it fits your own circumstances is a personal-advice question best taken to an FCA-regulated adviser.

Read Next

• ISA vs Pension UK: Which Wins for You?
• SIPP vs Workplace Pension: When Each Wins
• Trading 212 SIPP: The Low-Cost Pension Option
• Stocks and Shares ISA Comparison
• SIPPs Comparison
• Compound Interest Calculator
• Salary Sacrifice Optimiser