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UK Compound Interest Calculator

See how compound interest grows your money — and how the compounding frequency and your regular contributions change the final result.

Your savings

£
£
%
20 years
Future value Compounding monthly
£—
Total contributions£—
Interest earned£—

Pure maths — no UK thresholds. Your actual return depends on the account or fund you choose and can go down as well as up. See MoneyHelper — compound interest.

How it works

Compound interest means you earn interest on your interest. Each period, the interest is added to your balance, and the next period's interest is calculated on the larger amount. The more often interest is compounded, the faster the balance grows — daily compounding grows slightly faster than monthly, and monthly faster than annual. Regular contributions add more principal on top.

Example calculation

For an initial £10,000 at 7% over 20 years:

  • Compounded annually: ≈ £38,697
  • Compounded monthly: ≈ £40,387
  • Compounded daily: ≈ £40,547
  • With £100/month added (monthly compounding): ≈ £92,480, of which £34,000 is your own money

Example is illustrative — returns vary and are not guaranteed.

Methodology & formula

For the initial lump sum, the classic compound interest formula is used:

A = P × (1 + r/f)f·t
  • A = future value of the lump sum
  • P = initial amount
  • r = annual interest rate (as a decimal)
  • f = compounding frequency (times per year)
  • t = number of years

Monthly contributions are modelled as a monthly-compounded annuity (paid at the end of each month):

Contributions value = M × [ (1 + r/12)12t − 1 ] / (r/12)

where M is the monthly contribution. Future value = lump sum value + contributions value. Interest earned = future value − total paid in.

UK-specific information

  • ISA context: inside an ISA, growth is free of UK Income Tax and Capital Gains Tax — the £20,000 annual ISA allowance applies for 2026/27. GOV.UK · 2026/27
  • AER: UK savings accounts quote an Annual Equivalent Rate (AER), which reflects the effect of compounding — useful for comparing accounts with different compounding frequencies.
  • Tax on interest: outside an ISA, interest is taxable. The Personal Savings Allowance is £1,000 for basic-rate and £500 for higher-rate taxpayers (2026/27). GOV.UK · 2026/27
  • This calculator shows growth before tax — check how the Personal Savings Allowance applies to you.

Frequently asked questions

Why does daily compounding give a bigger result than annual?
With daily compounding, interest is added to the balance every day, so every subsequent day's interest is calculated on a slightly larger amount. Over long terms this small difference compounds into a noticeably larger balance than annual compounding.
How big is the difference between compounding frequencies?
For £10,000 at 7% over 20 years: £38,697 annually, £40,387 monthly and £40,547 daily. The gap grows with the rate, the term and the balance.
Is compound interest taxed in the UK?
Interest is taxable outside an ISA, within your Personal Savings Allowance (£1,000 basic rate, £500 higher rate for 2026/27). Inside an ISA, growth is tax-free.
What is the rule of 72?
A quick estimate: divide 72 by the annual rate to estimate how many years it takes to double. At 7%, roughly 72 ÷ 7 ≈ 10 years. It is an approximation, not an exact figure.
Does this calculator guarantee a return?
No. It shows the mathematical result of a fixed rate. Real returns — especially on investments — vary and can fall, and the value of investments can go down as well as up.
Should I add a lump sum or monthly contributions?
Both help. A lump sum grows for the whole term, so starting earlier usually beats adding more later — the key advantage of compound interest is time in the market.

Related calculators

UK Savings Calculator · ISA Calculator · Investment Return Calculator · Home

Sources

Casvia provides educational calculators and general information. It does not provide personal financial, tax or investment advice. Rules and thresholds can change — always check the latest official guidance.