Compound Interest Calculator UK
See how your savings grow when interest earns interest — and the two things that change the outcome most: time, and whether your money sits inside an ISA.
Compound interest is what happens when the interest you earn starts earning interest of its own — so your money grows not in a straight line, but on a curve that gets steeper the longer you leave it. Put £10,000 away at 5% and after one year you have £10,500; but after 20 years you have over £26,500, because each year’s interest is calculated on a bigger balance than the last. The single biggest driver is time — which is why starting early matters far more than starting big. The second, in the UK, is tax: interest earned outside an ISA can be taxed once it exceeds your Personal Savings Allowance, quietly dragging on growth, while interest inside an ISA compounds completely tax-free. The frequency of compounding (daily, monthly, or yearly) and any regular top-ups you add change the result too — small monthly contributions, compounded over decades, can dwarf the original lump sum. This calculator shows your balance over time, the interest earned, and the difference an ISA makes. To set a target, see the Savings Goal Calculator; to compare wrappers, ISA vs SIPP vs GIA.
Savings plan
Interest rate
UK savings tax
Inflation and target
Compound interest result
Final balance after interest
Calculating…
Calculating…
Total deposits
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Gross interest
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Savings tax
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Net interest
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Today’s-money value
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Target check
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Compound interest — quick lookup
The left table shows how a £10,000 lump sum grows at 5% over time — notice how the interest earned accelerates, roughly doubling the gap each decade. The right shows what regular saving of £200 a month builds, where your own contributions and compound growth combine. Both assume a 5% rate for illustration; the real lesson is the shape of the curve, not the exact figure.
| Years | Balance | Interest |
|---|---|---|
| 1 year | £10,500 | £500 |
| 5 years | £12,763 | £2,763 |
| 10 years | £16,289 | £6,289 |
| 20 years | £26,533 | £16,533 |
| 30 years | £43,219 | £33,219 |
| Years | Balance | Interest |
|---|---|---|
| 5 years | £13,601 | £1,601 |
| 10 years | £31,056 | £7,056 |
| 20 years | £82,207 | £34,207 |
| 30 years | £166,452 | £94,452 |
Left: a single £10,000 deposit, interest compounded yearly, no further contributions. Right: £200 paid in every month, compounded monthly. Note how, with regular saving over 30 years, the interest (£94,452) eventually exceeds everything paid in (£72,000) — the point at which compounding does more work than you do. Rates are illustrative; actual savings rates vary and change over time.
How compound interest works
Compound interest is often called the most powerful force in saving, and the reason is simple once you see it: you earn interest not just on your original money, but on all the interest it has already earned. That small shift — interest on interest — is what turns a straight line into a curve.
Interest on interest
With simple interest, you’d earn the same amount every year — 5% of your original £10,000 is £500, year after year. With compound interest, each year’s interest is added to the balance, so the next year’s interest is calculated on a larger sum. Year one earns £500; but year two earns 5% of £10,500, and so on. Early on the difference is small, but it widens relentlessly, which is why a 30-year balance is so much more than three times a 10-year one.
Why time matters more than the rate
Because growth compounds, the length of time your money is invested has an outsized effect — more, often, than squeezing out a slightly higher rate. The interest earned roughly doubles each decade in our example, from £6,289 over 10 years to £16,533 over 20. This is also why starting early beats starting big: a smaller sum left for longer can overtake a larger sum left for less time. The first years feel slow, but they’re laying the foundation for the steep part of the curve later.
Compounding frequency and contributions
Two other levers shape the result. Compounding frequency — how often interest is added — nudges things up: £10,000 at 5% over 10 years grows to £16,289 compounded yearly, but £16,470 compounded monthly. The effect is real but modest. Far more powerful are regular contributions: adding £200 a month on top of compounding is what builds serious balances over decades, because every contribution starts its own compounding journey from the day you make it.
Worked examples
Four scenarios: the starting-early effect, compounding frequency, regular saving overtaking the principal, and the UK tax drag outside an ISA.
Scenario 1 · Starting early
Ten years’ head start, nearly double the pot
Starting at 25 (40 years): £305,204
Starting at 35 (30 years): £166,452
Two savers paying in exactly the same £200 a month end up nearly £140,000 apart, purely because one started ten years earlier. The early saver pays in only £24,000 more, but ends with £138,752 more — the rest is compounding doing its work over the extra decade. This is the clearest argument for starting whatever you can, as soon as you can: the years at the start, which feel like they’re doing little, are actually the most valuable.
Scenario 2 · Compounding frequency
Daily vs yearly — a small but real edge
Compounded yearly: £16,289 · monthly: £16,470 · daily: £16,487
Difference yearly to daily: £198
How often interest is added makes a modest difference. The same £10,000 at the same 5% grows to £16,289 if compounded once a year, but £16,487 if compounded daily — about £198 more over a decade. It’s worth understanding when comparing accounts, since a headline rate can compound at different frequencies, but it’s a minor factor next to time and contributions. Don’t chase compounding frequency at the expense of a better rate or an ISA wrapper.
Scenario 3 · Regular saving
When the interest overtakes what you paid in
Paid in: £72,000 · interest earned: £94,452
Final balance: £166,452
This is the moment compounding becomes magic. Over 30 years of saving £200 a month, you pay in £72,000 — but the interest earned, £94,452, ends up larger than everything you contributed. Past a certain point, your money is doing more work than you are. The crossover takes time to reach, which is exactly why patience and consistency matter more than the size of any single contribution. Small, regular, and long-term wins.
Scenario 4 · The UK tax drag
ISA vs taxed — £5,700 over a decade
Inside an ISA (tax-free): £32,578
Taxed at 40% on interest (net ~3%): £26,878
In the UK, where your money sits matters as much as the rate. The same £20,000 at 5% grows to £32,578 inside an ISA, where interest is completely tax-free. Held in an ordinary account by a higher-rate taxpayer whose interest exceeds the Personal Savings Allowance, the effective rate drops to around 3% after tax, leaving just £26,878 — a £5,700 gap from tax alone. With the £20,000 annual ISA allowance available, sheltering savings is one of the simplest ways to protect compound growth. See ISA vs SIPP vs GIA for the wrappers.
Getting the most from compounding — four levers
Most compound interest guides just show the formula. But the real question is what you can do to make the curve steeper — and in the UK, one of the biggest levers is tax. Work through these four:
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1
Are you starting as early as you can?
Time is the most powerful lever by far. Because growth compounds, years at the start are worth more than money added later. A ten-year head start on £200 a month is worth nearly £140,000 by retirement. Whatever you can save, starting sooner beats starting bigger.
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2
Is your money in an ISA?
This is the big UK lever. Interest outside an ISA is taxable once it exceeds your Personal Savings Allowance (£1,000 basic-rate, £500 higher-rate), dragging on growth. Inside an ISA, with a £20,000 annual allowance, it compounds entirely tax-free — worth £5,700 on £20,000 over a decade for a higher-rate saver.
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3
Are you adding regular contributions?
A lump sum compounds, but regular top-ups multiply the effect, because each one starts its own compounding from day one. Over decades, the interest on steady monthly saving can exceed everything you paid in. Consistency beats timing — automate it if you can.
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4
Have you accounted for inflation?
Compound growth is nominal; inflation erodes what it’s worth. £10,000 growing to £26,533 over 20 years at 5% is worth far less in today’s money if prices rose 3% a year. Aim for a return that beats inflation, and judge progress in real terms, not just the headline balance.
£20,000 over 10 years — what changes the outcome
Same money, same rate, different choices:
The same £20,000 at the same rate can grow by £12,578 or £6,878 over a decade, depending only on whether it sits inside an ISA — and that’s before the bigger effects of time and regular saving. That’s why “how much will my savings grow?” isn’t just about the interest rate. For most savers the practical priorities are simple: start as early as you can, use your ISA allowance to keep growth tax-free, add regular contributions and let them run, and judge the result against inflation rather than the headline number. Compounding rewards patience above all — the longer you leave it, the more the curve works in your favour. The calculator lets you test each of these for your own figures.
The Rule of 72 — a quick mental shortcut
There’s a handy trick for estimating compounding in your head: the Rule of 72. Divide 72 by your interest rate to get the rough number of years for your money to double. At 5%, that’s 72 ÷ 5 ≈ 14.4 years to double; at 7%, about 10.3 years; at 4%, around 18. It’s an approximation, not exact, but it’s remarkably close and gives you an instant feel for how rate and time interact — useful for sanity-checking any savings or investment projection without reaching for a calculator.
Two scenarios that change the picture
What if…
You added a lump sum AND saved monthly?
What if…
Inflation runs at 3% the whole time?
Key compound interest terms explained
Compound interest brings together a handful of saving and investing terms — some about the maths, some about the UK tax wrappers that protect it. The ten below cover what you’ll meet.
- Compound interest
- Interest calculated on your original sum and on the interest already earned, so the balance grows on a steepening curve rather than a straight line. The engine behind long-term saving.
- Simple interest
- Interest paid only on the original principal, the same amount every period. It grows in a straight line and falls steadily behind compound interest the longer the term.
- Principal
- The starting sum you put in, before any interest. In the formula it’s “P” — the base on which the first round of interest is calculated.
- Compounding frequency
- How often interest is added to the balance — yearly, monthly, or daily. More frequent compounding gives a slightly higher result, though the effect is small next to time and contributions.
- AER
- Annual Equivalent Rate — a standardised figure that shows the true yearly return including compounding, so you can compare savings accounts fairly however often they pay interest.
- ISA
- An Individual Savings Account, where interest, dividends, and gains are completely tax-free, forever. The annual allowance is £20,000, making it the simplest way to shelter compound growth in the UK.
- Personal Savings Allowance
- The interest you can earn tax-free outside an ISA: £1,000 for basic-rate taxpayers, £500 for higher-rate, nil for additional-rate. Above it, interest is taxed, dragging on compounding.
- Real return
- Your return after inflation — roughly the interest rate minus the inflation rate. It’s what actually grows your spending power, and the figure to judge progress by, not the headline balance.
- Rule of 72
- A shortcut for compounding: 72 divided by the interest rate gives the rough years for money to double. At 5%, about 14.4 years. An approximation, but a quick, surprisingly accurate guide.
- Regular contributions
- Money added periodically on top of the principal, such as £200 a month. Each contribution starts its own compounding, which is what builds large balances over long periods.
Five mistakes people make with compound interest
Compounding is simple in theory but easy to underuse in practice. These five errors, drawn from the recurring r/UKPersonalFinance and r/FIREUK threads, are the ones that quietly cost growth.
Waiting to start until you can save more
The most expensive mistake: delaying because the amount feels too small to matter. Because time is the biggest driver, a modest sum started early beats a larger one started late. Ten years’ delay on £200 a month costs nearly £140,000 by retirement. Start with whatever you can, now.
Cost: years of compounding lost forever Fix: start small, start nowSaving outside an ISA when you don’t need to
Holding savings in an ordinary account once interest tops the Personal Savings Allowance means tax quietly eats into compounding. With a £20,000 ISA allowance available, leaving money exposed to tax can cost thousands over a decade. Use the wrapper before the ordinary account.
Cost: £5,700 on £20k over 10 years (40%) Fix: use your £20,000 ISA allowanceWithdrawing interest instead of reinvesting
Taking the interest out each year turns compound interest into simple interest — you lose the “interest on interest” that makes the curve steepen. Unless you need the income, leaving interest to roll up is what unlocks the long-term growth. Reinvest by default.
Cost: the entire compounding effect Fix: leave interest to roll upIgnoring inflation entirely
A balance that looks impressive in future pounds can be worth far less in today’s money. Savers who chase a headline figure without checking the real return can end up barely keeping pace with prices. Judge growth against inflation, and seek a rate that genuinely beats it.
Cost: eroded spending power Fix: track the real (after-inflation) returnChasing compounding frequency over rate
Some savers fixate on whether an account compounds daily or monthly, when the difference is tiny next to the headline rate — under £200 on £10,000 over a decade. Compare on AER, which already accounts for frequency, and prioritise the rate and the tax wrapper instead.
Cost: a worse rate for a trivial gain Fix: compare on AER, prioritise rate and ISAFrequently asked questions
What is compound interest?
Compound interest is interest earned on both your original sum and the interest it has already earned. Because each period’s interest is added to the balance, the next period earns interest on a larger amount, so your money grows on a curve that steepens over time.
It’s the opposite of simple interest, which only ever pays on the original principal. Over long periods the difference is dramatic — which is why compound interest is so important for saving and investing.
How is compound interest calculated?
The formula is A = P × (1 + r/n)^(n×t), where P is your starting sum, r is the annual rate as a decimal, n is how many times a year interest compounds, and t is the number of years.
For example, £10,000 at 5% compounded yearly for 20 years is 10,000 × (1.05)^20 = £26,533. If you also add regular contributions, each one compounds from the date you pay it in, which the calculator handles for you.
How much will £10,000 grow with compound interest?
At 5% compounded yearly, £10,000 grows to about £12,763 after 5 years, £16,289 after 10 years, and £26,533 after 20 years. Notice the interest earned roughly doubles each decade — that’s compounding accelerating.
The actual figure depends on the rate, which varies between accounts and over time, how often it compounds, and whether tax applies. Inside an ISA the growth is tax-free; outside one, tax may reduce it once interest exceeds your Personal Savings Allowance.
Is compound interest taxed in the UK?
It can be, depending on where your money is. Interest earned inside an ISA is completely tax-free. Outside an ISA, interest is tax-free up to your Personal Savings Allowance — £1,000 for basic-rate taxpayers, £500 for higher-rate, nil for additional-rate — and taxed above that.
Banks pay interest gross (without tax deducted), and HMRC collects any tax owed, usually by adjusting your tax code. Using your £20,000 annual ISA allowance is the simplest way to keep compound growth entirely tax-free.
Does compounding frequency really matter?
A little, but less than people think. The same £10,000 at 5% over 10 years grows to £16,289 compounded yearly, £16,470 monthly, and £16,487 daily — a difference of under £200.
It’s worth understanding when comparing accounts, but the AER (Annual Equivalent Rate) already accounts for frequency, so comparing on AER is the fair way. Far more important are how long you save for, how much you contribute, and whether you avoid tax with an ISA.
What is the Rule of 72?
It’s a quick mental shortcut for compounding: divide 72 by your interest rate to estimate how many years it takes your money to double. At 5%, that’s 72 ÷ 5 ≈ 14.4 years; at 7%, about 10.3 years.
It’s an approximation rather than an exact figure, but it’s remarkably close for typical rates and gives you an instant sense of how rate and time interact — handy for sanity-checking any savings or investment projection in your head.
Is regular saving better than a lump sum?
They do different jobs. A lump sum gets the longest possible run of compounding, so investing it sooner generally beats drip-feeding the same total. But for most people, who don’t have a large sum to start with, regular contributions are how wealth actually builds.
Each monthly contribution starts compounding from the day it’s paid, and over decades the interest can exceed everything you paid in. Combining a lump sum with regular top-ups is the most powerful approach of all.
How does inflation affect compound interest?
Inflation erodes what your future balance is worth in today’s money. A balance growing at 5% while prices rise 3% is really growing at roughly 2% in real terms — your spending power still increases, but far more slowly than the headline figure suggests.
£10,000 growing to £26,533 over 20 years at 5% might be worth around £14,859 in today’s money after 3% inflation. The lesson is to aim for a return that beats inflation and to judge progress in real, after-inflation terms.
Related calculators
Compound interest underpins every savings and investment goal, from a target pot to a pension. These calculators put it to work.
Methodology & sources
How the maths works
The calculator uses the standard compound interest formula, A = P × (1 + r/n)^(n×t), where P is the principal, r the annual rate as a decimal, n the number of compounding periods a year, and t the number of years. Where you add regular contributions, it applies the future value of a series, compounding each contribution from the point it is paid in, so monthly saving is modelled month by month. The interest earned is simply the final balance minus everything paid in. For the UK tax illustration, it shows growth inside an ISA as fully tax-free, and growth outside one at a net rate after the relevant Income Tax rate is applied to interest above the Personal Savings Allowance. The Rule of 72 is offered as a quick doubling-time estimate, and the inflation illustration applies an approximate real rate of the nominal rate minus inflation.
These are illustrative projections to show how compounding behaves, not a forecast or a guarantee. Real outcomes depend on the actual interest or investment rate, which varies between products and changes over time, how often interest compounds, your tax position, inflation, and whether you keep contributing. Savings rates and tax allowances can change, and investment returns can fall as well as rise — past performance is not a guide to the future. The figures shown use illustrative rates to demonstrate the principle. The aim is to help you understand how compound interest grows your money and what affects it — not to recommend any particular savings or investment product.
Assumptions and conventions used
- Formula: A = P × (1 + r/n)^(n×t)
- Regular contributions compounded from the date paid in
- Interest earned = final balance − total paid in
- ISA growth: fully tax-free (£20,000 annual allowance)
- Taxed growth: net rate after tax on interest above the PSA
- Personal Savings Allowance: £1,000 basic, £500 higher, nil additional
- Rule of 72: 72 ÷ rate ≈ years to double
- Real return ≈ nominal rate − inflation rate
- Rates shown are illustrative, not predictions
Primary sources
Frequently asked questions
What is compound interest?
Compound interest is interest earned on both your original sum and the interest it has already earned. Because each period’s interest is added to the balance, the next period earns interest on a larger amount, so your money grows on a curve that steepens over time.
It’s the opposite of simple interest, which only ever pays on the original principal. Over long periods the difference is dramatic — which is why compound interest is so important for saving and investing.
How is compound interest calculated?
The formula is A = P × (1 + r/n)^(n×t), where P is your starting sum, r is the annual rate as a decimal, n is how many times a year interest compounds, and t is the number of years.
For example, £10,000 at 5% compounded yearly for 20 years is 10,000 × (1.05)^20 = £26,533. If you also add regular contributions, each one compounds from the date you pay it in, which the calculator handles for you.
How much will £10,000 grow with compound interest?
At 5% compounded yearly, £10,000 grows to about £12,763 after 5 years, £16,289 after 10 years, and £26,533 after 20 years. Notice the interest earned roughly doubles each decade — that’s compounding accelerating.
The actual figure depends on the rate, which varies between accounts and over time, how often it compounds, and whether tax applies. Inside an ISA the growth is tax-free; outside one, tax may reduce it once interest exceeds your Personal Savings Allowance.
Is compound interest taxed in the UK?
It can be, depending on where your money is. Interest earned inside an ISA is completely tax-free. Outside an ISA, interest is tax-free up to your Personal Savings Allowance — £1,000 for basic-rate taxpayers, £500 for higher-rate, nil for additional-rate — and taxed above that.
Banks pay interest gross (without tax deducted), and HMRC collects any tax owed, usually by adjusting your tax code. Using your £20,000 annual ISA allowance is the simplest way to keep compound growth entirely tax-free.
Does compounding frequency really matter?
A little, but less than people think. The same £10,000 at 5% over 10 years grows to £16,289 compounded yearly, £16,470 monthly, and £16,487 daily — a difference of under £200.
It’s worth understanding when comparing accounts, but the AER (Annual Equivalent Rate) already accounts for frequency, so comparing on AER is the fair way. Far more important are how long you save for, how much you contribute, and whether you avoid tax with an ISA.
What is the Rule of 72?
It’s a quick mental shortcut for compounding: divide 72 by your interest rate to estimate how many years it takes your money to double. At 5%, that’s 72 ÷ 5 ≈ 14.4 years; at 7%, about 10.3 years.
It’s an approximation rather than an exact figure, but it’s remarkably close for typical rates and gives you an instant sense of how rate and time interact — handy for sanity-checking any savings or investment projection in your head.
Is regular saving better than a lump sum?
They do different jobs. A lump sum gets the longest possible run of compounding, so investing it sooner generally beats drip-feeding the same total. But for most people, who don’t have a large sum to start with, regular contributions are how wealth actually builds.
Each monthly contribution starts compounding from the day it’s paid, and over decades the interest can exceed everything you paid in. Combining a lump sum with regular top-ups is the most powerful approach of all.
How does inflation affect compound interest?
Inflation erodes what your future balance is worth in today’s money. A balance growing at 5% while prices rise 3% is really growing at roughly 2% in real terms — your spending power still increases, but far more slowly than the headline figure suggests.
£10,000 growing to £26,533 over 20 years at 5% might be worth around £14,859 in today’s money after 3% inflation. The lesson is to aim for a return that beats inflation and to judge progress in real, after-inflation terms.
Related calculators
Compound interest underpins every savings and investment goal, from a target pot to a pension. These calculators put it to work.
Methodology & sources
How the maths works
The calculator uses the standard compound interest formula, A = P × (1 + r/n)^(n×t), where P is the principal, r the annual rate as a decimal, n the number of compounding periods a year, and t the number of years. Where you add regular contributions, it applies the future value of a series, compounding each contribution from the point it is paid in, so monthly saving is modelled month by month. The interest earned is simply the final balance minus everything paid in. For the UK tax illustration, it shows growth inside an ISA as fully tax-free, and growth outside one at a net rate after the relevant Income Tax rate is applied to interest above the Personal Savings Allowance. The Rule of 72 is offered as a quick doubling-time estimate, and the inflation illustration applies an approximate real rate of the nominal rate minus inflation.
These are illustrative projections to show how compounding behaves, not a forecast or a guarantee. Real outcomes depend on the actual interest or investment rate, which varies between products and changes over time, how often interest compounds, your tax position, inflation, and whether you keep contributing. Savings rates and tax allowances can change, and investment returns can fall as well as rise — past performance is not a guide to the future. The figures shown use illustrative rates to demonstrate the principle. The aim is to help you understand how compound interest grows your money and what affects it — not to recommend any particular savings or investment product.
Assumptions and conventions used
- Formula: A = P × (1 + r/n)^(n×t)
- Regular contributions compounded from the date paid in
- Interest earned = final balance − total paid in
- ISA growth: fully tax-free (£20,000 annual allowance)
- Taxed growth: net rate after tax on interest above the PSA
- Personal Savings Allowance: £1,000 basic, £500 higher, nil additional
- Rule of 72: 72 ÷ rate ≈ years to double
- Real return ≈ nominal rate − inflation rate
- Rates shown are illustrative, not predictions