Free UK Compound Interest Calculator
Find out how much your money can grow when interest earns interest. Enter your starting balance, rate, time frame and any regular contributions below, and the calculator shows you exactly how your balance builds year by year
Your Compound Interest, Worked Out
Adjust the numbers below and the results update instantly, including a year by year growth chart
This is a calculated projection for planning purposes only, not financial advice.
How to Use This Calculator
Enter your starting amount
Your initial deposit or investment. This is also called the principal.
Add your interest rate
Use the annual rate (AER) your account offers. Check your latest statement if you’re not sure, since rates change often.
Choose your compounding frequency
Most UK savings accounts compound daily or monthly. Some fixed rate bonds and gilts compound annually.
Set your time horizon
How many years do you plan to leave the money in place?
Add regular contributions, if you plan to make them
Even small monthly deposits change the outcome significantly over time.
Review your results
You’ll see your final balance, total interest earned, and how much came from contributions versus growth.
What Is Compound Interest?
Compound interest is interest calculated on both your original balance and the interest that balance has already earned. Simple interest only ever applies to your starting amount, so it grows in a straight line. Compound interest applies to a balance that keeps getting bigger, so it grows faster the longer it runs.
Here’s the plain English version: say you put £100 in an account earning 10% a year. After year one, you have £110. In year two, you don’t earn 10% of £100 again, you earn 10% of £110, which is £11. That extra pound is interest earned on interest, and it’s the entire mechanism behind long term saving and investing.
The Compound Interest Formula
The standard formula is:
A — the final amount after growth
P — your starting principal
r — the annual interest rate, as a decimal
n — the number of compounding periods per year
t — the number of years
If you’re adding regular contributions, the formula extends to:
PMT — your contribution amount per compounding period
Here, PMT is your contribution amount per compounding period. This is the piece most basic calculators leave out, and it’s usually the part that matters most for anyone actually building savings over time.
Compound Interest Worked Examples
Lump Sum Only
Say you put £10,000 into an account paying 7% a year, compounded monthly, for 20 years with no further deposits. Using the formula above:
A = 10,000 × (1 + 0.07/12)²⁴⁰ = £40,387.39
Your original £10,000 nearly quadruples, and none of that extra £30,387 came out of your pocket. It came entirely from compounding.
With Monthly Contributions
Now take the same £10,000 starting balance and 7% rate, but add £200 a month for 20 years:
FV = £40,387.39 + growth on £200/month = £144,572.72
That’s the part most basic calculators skip. The extra £200 a month, £48,000 in total over 20 years, turns into more than £104,000 in final value once compounding is applied to those contributions too. Small, consistent deposits do far more work than most people expect.
Why Compounding Frequency Matters
The more often interest compounds, the more you earn, though the difference shrinks as frequency increases. Here’s £5,000 invested at 6% for 10 years, compared across compounding frequencies:
£5,000 invested at 6% for 10 years
| Compounding frequency | Balance after 10 years |
|---|---|
| Annually | £8,954.24 |
| Quarterly | £9,070.09 |
| Monthly | £9,096.98 |
| Daily | £9,110.14 |
Notice that jumping from annual to quarterly compounding gains you more than jumping from monthly to daily. Past a certain point, more frequent compounding delivers diminishing returns, so don’t pick a savings account based on compounding frequency alone. Always compare accounts using AER (Annual Equivalent Rate), not the headline interest rate, since AER already accounts for compounding and makes accounts genuinely comparable.
Compound Interest vs. Simple Interest
Using the same £10,000 at 7% for 20 years, simple interest would only grow to £24,000, compared to £40,387.39 with monthly compounding. That £16,387 gap is the entire value of compounding at work. It’s also why credit cards and overdrafts that charge compound interest can become expensive quickly if balances aren’t cleared, the same maths that builds your savings also builds a debt balance if it’s left unpaid.
The Rule of 72
Want a fast mental shortcut instead of the full formula? Divide 72 by your interest rate to estimate how many years it takes your money to double. At 7%, that’s 72 ÷ 7, or roughly 10.3 years. It’s not exact, but it’s close enough for quick planning and a useful gut check when comparing offers.
Common Mistakes to Avoid
Ignoring fees: Account fees and platform charges eat into your returns before compounding even starts. Always check the net rate, not just the advertised one.
Withdrawing early: Breaking a fixed term or dipping into savings resets the clock on compounding. The biggest gains come in the later years, so early withdrawals cost you more than they look like on paper.
Underestimating inflation: A 5% return sounds great until you remember UK inflation has averaged around 2 to 3% a year historically. Your real return is what’s left after inflation, not the headline number.
Forgetting tax: Interest earned outside an ISA, or above your Personal Savings Allowance, is taxable. Factor this in when comparing account types.
Do I Pay Tax on Compound Interest in the UK?
It depends on where the money is held and how much interest you earn.
Inside a Cash ISA or Stocks and Shares ISA, all interest and growth is completely tax free, and you can pay in up to £20,000 across all your ISAs each tax year (2026/27 allowance).
Outside an ISA, most people can still earn interest tax free up to their Personal Savings Allowance:
Personal Savings Allowance, 2026/27 tax year
| Tax band | Tax-free allowance |
|---|---|
| Basic rate taxpayer | £1,000 a year |
| Higher rate taxpayer | £500 a year |
| Additional rate taxpayer | £0 |
Interest earned above your allowance is taxed at your normal rate of Income Tax. Figures are correct for the 2026/27 tax year and can change, so it’s worth checking current thresholds before relying on them for a big decision.
Compound Interest, Answered
How is compound interest calculated?
It’s calculated by applying the interest rate to your balance at the end of each compounding period, then adding that interest back to the balance so the next period’s interest is calculated on the new, larger total. This calculator does that calculation for you, month by month, based on the compounding frequency you choose.
What is a good compound interest rate?
It depends entirely on the account type and current market conditions. Easy access savings, fixed rate bonds and cash ISAs all offer different rates, and rates move with the Bank of England base rate. Compare current offers using AER so you’re comparing like for like.
Does compound interest work on debt too?
Yes. Credit cards, overdrafts and some loans charge compound interest on unpaid balances, which is why debt can grow quickly if only minimum payments are made. The same maths that builds savings works against you when it’s applied to a debt.
How often should interest compound for the best results?
More frequent compounding always earns slightly more, but the gains shrink the more often interest is added. Daily compounding barely beats monthly in most real-world cases, so the interest rate itself matters far more than the frequency.
Can I use this for investments, not just savings accounts?
Yes, the same compounding maths applies to investments, though returns are variable rather than fixed, so treat any projection as an estimate rather than a guarantee. This calculator works well for a rough planning figure either way.
What's the difference between AER and interest rate?
AER (Annual Equivalent Rate) shows what you’d earn over a year once compounding is factored in, so it lets you compare accounts fairly. The plain interest rate doesn’t account for compounding frequency, so two accounts with the same headline rate can pay out differently.
* This calculator is for educational purposes and general planning. It does not account for taxes, fees, or investment risk, and it is not financial advice. For decisions specific to your situation, consider speaking with a qualified financial adviser.
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