Compound Interest Calculator
Calculate how your savings grow with compound interest over time. See the power of compounding with regular contributions.
Source: Bank of England — Interest rates
By Konstantin Iakovlev · Founder, Calks.uk
Last updated: · Verified against HMRC and GOV.UK 2026/27 rates
Final Balance after 10 years
£47,526.55
Total Deposits
£34,000.00
Interest Earned
£13,526.55
Growth
39.8%
| Year | Deposits | Interest | Balance |
|---|---|---|---|
| 1 | £12,400.00 | £567.39 | £12,967.39 |
| 2 | £14,800.00 | £1,286.60 | £16,086.60 |
| 3 | £17,200.00 | £2,165.39 | £19,365.39 |
| 4 | £19,600.00 | £3,211.93 | £22,811.93 |
| 5 | £22,000.00 | £4,434.80 | £26,434.80 |
| 6 | £24,400.00 | £5,843.03 | £30,243.03 |
| 7 | £26,800.00 | £7,446.09 | £34,246.09 |
| 8 | £29,200.00 | £9,253.96 | £38,453.96 |
| 9 | £31,600.00 | £11,277.11 | £42,877.11 |
| 10 | £34,000.00 | £13,526.55 | £47,526.55 |
Disclaimer
This calculator is provided for informational purposes only and should not be considered as financial or tax advice. All calculations are performed locally in your browser — no personal data is collected or sent to our servers. Rates and thresholds are sourced from HMRC and GOV.UK and are updated for the current tax year. Always verify results with HMRC or consult a qualified professional before making financial decisions.
How It Works
Compound interest means earning interest on both your original deposit and the interest already accumulated. The formula is A = P(1 + r/n)^(nt), where P is the principal, r is the annual rate, n is compounding frequency, and t is time in years.
The difference between simple and compound interest grows dramatically over time. A £10,000 deposit at 5% over 20 years grows to £20,000 with simple interest but £26,533 with annual compounding — over £6,500 more, purely from compounding.
Most UK savings accounts compound interest annually or monthly. AER (Annual Equivalent Rate) shows the effective annual return with compounding factored in, making it the best rate to compare between accounts. This calculator supports daily, monthly, quarterly and annual compounding.
The miracle of compounding — Einstein's '8th wonder'. £10,000 invested at 7% annual return becomes: £19,672 after 10 years, £38,697 after 20 years, £76,123 after 30 years, £149,745 after 40 years. The first 10 years add £9,672 to your pot; the LAST 10 years add £73,622. Time, not deposit size, drives compounding. Starting at age 25 with £100/month at 7% gives you £262,000 by 65; starting at 35 gives only £121,000 — half the result for skipping just 10 years.
Compound frequency matters less than you'd think. £10,000 at 5% annual rate over 30 years: annual compounding = £43,219; monthly = £44,677; daily = £44,816; continuous = £44,817. The difference between annual and daily compounding over 30 years is just 3.7%. The compound rate is far more impactful than the frequency. Most UK savings accounts compound daily (interest calculated daily, paid monthly or annually); credit cards compound daily; ISAs are tax-free either way.
How to find the actual rate from advertised AER. AER (Annual Equivalent Rate) is what you actually earn including compounding. APR (Annual Percentage Rate) shows the cost of borrowing including fees. EAR (Effective Annual Rate) is the equivalent including compounding for credit. Always compare AER for savings, APR for loans, APRC for mortgages. A 5% gross monthly-paid account = 5.12% AER (slightly better than 5% paid annually). Comparing only the headline rate misleads you.
Real return = nominal return − inflation. £10,000 at 5% nominal return for 30 years = £43,219 nominally. But with 3% average inflation, the real (purchasing power) value is just £17,816 in today's money. To preserve and grow purchasing power, target investments above the inflation rate. Cash savings at 3% lose value when inflation is 4%; stocks averaging 7% beat 3% inflation by 4% real return — the historic UK equity premium. Use real returns to assess actual wealth, not nominal.
Compound interest formula. A = P × (1 + r/n)^(n×t). A = final amount, P = principal, r = annual rate (decimal), n = compounding frequency per year, t = years. £10,000 at 5% compounded monthly over 10 years: A = £10,000 × (1 + 0.05/12)^(12×10) = £16,470. Annual compounding gives £16,289 (small difference). Most UK savings compound daily, credit cards compound daily, mortgages compound monthly.
Rule of 72 — quick doubling estimate. Years to double = 72 ÷ annual rate (%). 6% rate: doubles in 12 years. 8%: 9 years. 10%: 7.2 years. Works well for rates 4-15%. UK equity index (FTSE All-Share with dividends reinvested) averaged 7% real return since 1900 — doubling every 10 years. £100/month from age 25 to 65 at 7% = £262k.
Why time beats deposit size. £100/month from age 25 to 65 = £262k at 7%. Same £100/month from 35 to 65 = £121k. From 45 = £52k. Each decade delay roughly halves the final pot. Most compound interest goes to the EARLIEST contributions. Doubling contributions late in career has much less effect than starting early. Investment growth dominates contributions at 30 years — growth = 70%+ of final pot.
Real return vs nominal return. Nominal: headline rate (e.g. 7%). Real: nominal minus inflation. £10k at 7% nominal over 30 years = £76k nominally. With 3% average inflation, real (purchasing power) value = £31k in today's money. Long-term planning should use real returns. Cash savings at 3% lose value when inflation is 4%. UK equity index has averaged 5-6% REAL return historically — preserves and grows purchasing power.
Example: £10,000 at 4.5% for 10 years, annual compounding
- Year 1: £10,000 × 1.045 = £10,450.00
- Year 5: £10,000 × 1.045⁵ = £12,461.82
- Year 10: £10,000 × 1.045¹⁰ = £15,529.69
- Total interest earned: £5,529.69
- Simple interest comparison: £4,500.00 (£1,029.69 less)
Source: Bank of England — Interest rates
Frequently Asked Questions
- The compound interest formula.
- A = P × (1 + r/n)^(n×t). A = final amount, P = principal, r = annual rate (decimal), n = compounding frequency per year, t = years. £10,000 at 5% annual compounded monthly for 10 years: A = £10,000 × (1 + 0.05/12)^(12×10) = £16,470. Annual compounding gives £16,289 — small difference (~1.1% in this case). Most UK savings accounts compound daily; credit cards compound daily; investment funds compound continuously.
- Rule of 72 — quick doubling estimate.
- Years to double money = 72 ÷ annual rate (%). 6% rate: doubles in 12 years. 8% rate: 9 years. 10% rate: 7.2 years. 12% rate: 6 years. This works well for rates between 4-15%. For higher rates use Rule of 70; for lower rates Rule of 69.3. UK equity index (FTSE All-Share with dividends reinvested) has averaged ~7% real return since 1900 — doubling roughly every 10 years.
- Why time beats deposit size in compounding.
- £100/month at 7% from age 25 to 65 (40 years) = £262,000. Same £100/month from age 35 to 65 (30 years) = £121,000. Same £100/month from age 45 (20 years) = £52,000. The first £100 invested at age 25 grows for 40 years; the first £100 at 45 grows for only 20 years. Most compound interest goes to the EARLIEST contributions. Starting investing at 25 instead of 35 doubles your retirement pot.