Compound Interest Calculator
Free compound interest calculator with monthly contributions, inflation adjustment, and tax-on-interest modelling for Cash ISAs and easy-access savings accounts.
Future value
£45,910
Growth over time
| year | Deposits | Interest | Balance |
|---|---|---|---|
| 1 | £2,400 | £510 | £12,910 |
| 2 | £2,400 | £643 | £15,953 |
| 3 | £2,400 | £783 | £19,136 |
| 4 | £2,400 | £929 | £22,465 |
| 5 | £2,400 | £1,082 | £25,947 |
| 6 | £2,400 | £1,242 | £29,589 |
| 7 | £2,400 | £1,409 | £33,399 |
| 8 | £2,400 | £1,584 | £37,383 |
| 9 | £2,400 | £1,767 | £41,551 |
| 10 | £2,400 | £1,959 | £45,910 |
For estimation purposes only. Actual returns and tax treatment depend on your specific bank, ISA allowance usage, and personal tax position — consult a financial adviser.
How compound interest works
Compound interest is interest calculated not only on the money you originally put in (your principal), but also on the interest that has already been added to your balance. Each time interest is credited, it becomes part of your balance for the next calculation, so your growth accelerates the longer you leave the money in place.
Say you deposit £10,000 into a savings account paying 4.5% a year, compounded monthly, and add £200 every month. In the first month you earn a relatively small amount of interest. But by year five your balance already includes several years of compounded interest on top of your original deposit and contributions, and the pace of growth keeps increasing each year because you're now earning interest on a much larger base. This calculator's compounding frequency setting (annually, monthly, daily and so on) controls how often credited interest starts earning interest of its own — the more frequent the compounding, the further your effective annual rate outpaces the quoted nominal rate.
How interest is taxed in the UK
Most UK savers can earn a certain amount of interest each tax year before paying any Income Tax on it, thanks to the Personal Savings Allowance (PSA). According to HMRC's guidance on tax-free interest on savings (gov.uk/apply-tax-free-interest-on-savings), basic-rate (20%) taxpayers can earn up to £1,000 in savings interest a year tax-free, higher-rate (40%) taxpayers get a reduced £500 allowance, and additional-rate (45%) taxpayers get no PSA at all — every pound of interest they earn outside a tax-free wrapper is taxable. Interest above your allowance is taxed at your marginal Income Tax rate, and HMRC normally collects it by adjusting your PAYE tax code rather than requiring a separate payment.
This calculator's 'Taxable savings account' setting defaults to modelling the basic-rate £1,000 allowance followed by 20% tax on the remainder. If you're a higher- or additional-rate taxpayer, your real after-tax return will be lower than this default shows — use the account-type setting alongside your own tax band to get a closer estimate.
Cash ISAs vs taxable savings accounts
A Cash ISA removes the tax question entirely: every pound of interest earned inside an ISA is free of Income Tax, no matter how large your balance grows or which tax band you're in, provided you stay within the annual ISA subscription limit of £20,000 across all your ISA accounts in a tax year (this calculator does not enforce that limit as a cap). For most higher- and additional-rate taxpayers — and increasingly for basic-rate taxpayers holding larger balances — an easy-access Cash ISA or fixed-rate Cash ISA will out-perform an equivalent taxable account purely because none of the interest is taxed.
Outside an ISA, easy-access savings accounts and fixed-rate bonds are taxed identically under the rules above; fixed-rate bonds typically pay a slightly higher rate in exchange for locking your money away for a set term, usually one to five years.
Example: £10,000 plus £200 a month at 4.5% for 10 years
Starting with a £10,000 deposit, adding £200 a month, at a 4.5% annual rate compounded monthly, this calculator projects a future value of £45,910 after 10 years. Of that total, £34,000 comes from your own deposit and contributions (£10,000 initial plus £24,000 paid in over the decade) and £11,910 is interest the account has earned. Because interest compounds monthly rather than annually, the effective annual rate works out to 4.59% — slightly higher than the quoted 4.5% nominal rate. At this rate, a lump sum left untouched would take about 15.4 years to double in value.
Example: the same £10,000 with no monthly top-ups
If you deposited the same £10,000 at 4.5% compounded monthly but made no further contributions, it would grow to £15,670 after 10 years — £5,670 of that being interest. Comparing the two examples shows how much of the £45,910 result above comes from an ongoing savings habit rather than the initial deposit alone: regular contributions turn a £15,670 outcome into a £45,910 one over the same 10-year period and rate.
UK savings rates have been well above the near-zero levels seen through the 2010s and into 2021, following a run of Bank of England base rate rises — but as the base rate has started easing back, easy-access and fixed-rate offers have been drifting down too, so it's worth rechecking best-buy tables rather than assuming a rate stays available for long. Because ISA allowances don't carry over, unused annual ISA subscription room is lost at the end of each tax year (5 April).
