What this calculator does
This free UK compound interest calculator estimates how a lump sum — or a starting amount topped up with regular contributions — grows over time when interest is compounded. Enter your starting amount, annual interest rate, compounding frequency and the number of years to see the projected final balance and total interest earned.
It is useful for projecting savings account growth, modelling ISA or pension contributions, understanding the long-term effect of different interest rates, and illustrating the power of starting early.
How compound interest works
The standard compound interest formula is:
Where A is the final amount, P is the starting principal, r is the annual interest rate (as a decimal), n is the number of compounding periods per year, and t is the number of years.
Why compounding frequency matters: The more frequently interest is added, the faster it grows, because each interest payment immediately starts earning its own interest. Monthly compounding produces slightly more than annual compounding at the same headline rate. This is why savings accounts advertise AER (Annual Equivalent Rate) — it standardises the comparison across different compounding frequencies.
Compound interest works against you too: The same principle that builds savings also applies to debt. Credit card interest compounded monthly, or a loan where unpaid interest is added to the balance, grows in exactly the same way — making unpaid debt expensive very quickly.
Example calculations
£10,000 invested at 5% per year, compounded annually:
| Years | Balance | Interest earned |
|---|---|---|
| 5 years | £12,763 | £2,763 |
| 10 years | £16,289 | £6,289 |
| 20 years | £26,533 | £16,533 |
| 30 years | £43,219 | £33,219 |
Notice that the interest earned in the second decade (£9,770) is considerably more than in the first decade (£6,289) — despite the same rate. This is compounding: a larger balance earns more interest each year.
The Rule of 72: At 5% interest, divide 72 ÷ 5 = 14.4 years to double the money. This confirms the table above — £10,000 at 5% grows past £20,000 between years 14 and 15.
When to use this calculator
- Savings planning — project a savings account or Cash ISA balance over 1–30 years to see whether you are on track for a savings goal.
- Comparing savings rates — enter different AERs to see how much extra growth a higher-rate account delivers over time.
- Understanding the value of starting early — compare the projected balance for someone who starts saving at 25 vs 35 to illustrate the compounding advantage of an early start.
- ISA and pension modelling — use the calculator as a rough guide to long-term growth, accepting that actual investment returns will vary.
- Explaining debt growth — enter a credit card rate to see how quickly an unpaid balance compounds if minimum payments only are made.
Common mistakes
Confusing AER with gross rate
AER and gross rate will differ when interest is compounded more than once a year. Always use the AER when comparing savings accounts — it is the only standardised figure that allows a fair like-for-like comparison.
Ignoring tax on savings interest
UK savers pay income tax on interest above the Personal Savings Allowance (£1,000 for basic rate, £500 for higher rate taxpayers). Cash ISA interest is tax-free. Projections from this calculator show gross interest — the after-tax return will be lower for most savers above the allowance.
Not accounting for inflation
A balance of £15,000 in ten years buys less than £15,000 today if inflation averages above 0%. If you are saving for a specific goal, consider using the real interest rate (nominal rate minus inflation) to estimate how purchasing power grows, not just the nominal balance.
Treating projections as guaranteed returns
Savings rates change — fixed-rate accounts lock in a rate, but variable rate accounts fluctuate. Investment returns are not guaranteed. The calculator assumes a constant rate throughout; real-world outcomes will differ.
Frequently asked questions
What is the difference between compound and simple interest?
Simple interest is calculated only on the original principal — the same interest amount is earned each period. Compound interest is calculated on the principal plus all previously earned interest, so the interest earned grows each period. Over 20 years at 5%, £10,000 grows to £20,000 with simple interest but approximately £26,533 with annual compounding.
What is AER and how is it different from a gross rate?
AER (Annual Equivalent Rate) standardises rates across different compounding frequencies. A savings account paying 5% gross monthly is paying 5.12% AER, because monthly compounding accelerates growth. Always compare savings accounts using the AER figure for a fair comparison.
What is the Rule of 72?
Divide 72 by the annual interest rate to estimate how many years it takes to double your money. At 6% it takes approximately 12 years (72 ÷ 6); at 9% approximately 8 years. It is a useful mental shorthand for comparing rates at a glance.
Do I pay tax on savings interest in the UK?
Most UK savers receive a Personal Savings Allowance: £1,000 per year for basic rate taxpayers, £500 for higher rate taxpayers, and nil for additional rate taxpayers. Interest above these amounts is taxable. Cash ISAs are fully exempt — interest earned is not taxed regardless of the amount.
How does inflation affect my real return?
Inflation reduces the purchasing power of your savings even when the balance grows. If your account pays 4% and inflation is 3%, your real return is approximately 1%. The calculator shows nominal growth only — to estimate real growth, subtract the expected inflation rate from the interest rate you enter.
Can I use this for ISA or pension planning?
The calculator can illustrate rough growth trajectories for ISA savings or pension contributions, but investment returns are not guaranteed and will vary with market performance. It is best used for Cash ISA projections or as an illustrative tool — not for precise pension planning, which should involve a qualified financial adviser.
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Important information
This calculator is for general information and illustrative purposes only. It projects growth based on a constant interest rate applied to the inputs you provide. Results do not constitute financial advice, investment advice or a guarantee of future returns.
Savings rates are variable and may change at any time. Investment returns are not guaranteed and can go down as well as up. The calculator does not account for inflation, tax on interest, charges, or any withdrawals from the account. Actual balances will differ from projections.
For advice on savings and investments, consult a qualified, FCA-regulated financial adviser. Read our full Disclaimer.