Compound interest calculator
This calculator works out what a lump sum plus a monthly saving grow to once interest is added, splitting the result into money paid in and interest earned. It assumes the entered rate holds constant for the whole period, an assumption real savings accounts and investments do not provide, and no return is guaranteed.
How the balance builds, year by year
The dark band is money you paid in. The green band on top is interest. The green band is thin early on and thickens quickly later.
Do you pay tax on savings interest?
The interest passes the £1,000 Personal Savings Allowance in year 6, when the account earns about £1,121 in a single year. By year 20 the annual interest is about £4,729, which is £3,729 over the allowance and would cost roughly £746 in tax at 20%. Interest inside a cash ISA is never taxed, so it is worth checking whether some of this belongs in one.
The allowance is set by your income tax band, not by how much you have saved. Basic rate taxpayers get £1,000 of savings interest tax free each year, according to gov.uk. Higher rate taxpayers get £500, and additional rate taxpayers get nothing. Interest above the allowance is taxed at the saver's usual rate, so 20%, 40% or 45% depending on the band. Banks report interest to HMRC, and the tax is usually collected through a change to the saver's tax code rather than a separate bill.
Interest earned inside a cash ISA sits outside all of this. It never counts towards the allowance and is never taxed, under gov.uk's ISA rules, which is why the ISA question tends to matter more the longer the saving continues and the larger the balance grows. Most calculators stop at the balance and leave the tax to be worked out separately.
How does the balance grow year by year?
| Year | Contributions to date | Interest to date | Balance |
|---|---|---|---|
| Year 1 | £8,000 | £292 | £8,292 |
| Year 2 | £11,000 | £736 | £11,736 |
| Year 3 | £14,000 | £1,338 | £15,338 |
| Year 4 | £17,000 | £2,105 | £19,105 |
| Year 5 | £20,000 | £3,045 | £23,045 |
| Year 6 | £23,000 | £4,167 | £27,167 |
| Year 7 | £26,000 | £5,477 | £31,477 |
| Year 8 | £29,000 | £6,986 | £35,986 |
| Year 9 | £32,000 | £8,702 | £40,702 |
| Year 10 | £35,000 | £10,634 | £45,634 |
| Year 11 | £38,000 | £12,794 | £50,794 |
| Year 12 | £41,000 | £15,190 | £56,190 |
| Year 13 | £44,000 | £17,834 | £61,834 |
| Year 14 | £47,000 | £20,737 | £67,737 |
| Year 15 | £50,000 | £23,911 | £73,911 |
| Year 16 | £53,000 | £27,370 | £80,370 |
| Year 17 | £56,000 | £31,124 | £87,124 |
| Year 18 | £59,000 | £35,190 | £94,190 |
| Year 19 | £62,000 | £39,579 | £101,579 |
| Year 20 | £65,000 | £44,308 | £109,308 |
How is the compound interest figure worked out?
The calculation rests on one idea: each month the balance is multiplied by a growth factor, then the contribution for that month is added. Doing that twelve times covers a year. Doing it 240 times covers twenty years.
The growth factor comes from the rate entered into the calculator. A quoted rate of 5% paid monthly is not quite 5% over the year, because the interest paid in January itself earns interest for the remaining eleven months. Converting to the effective annual rate handles that: AER equals one plus the rate divided by the number of compounding periods, raised to that number of periods, minus one. At 5% paid monthly the AER is about 5.12%. That annual figure is then turned back into a monthly growth factor by taking its twelfth root, so money added part way through the year earns only for the months it is actually there.
Contributions are treated as arriving at the end of each month, which is the cautious assumption, since a payment made on the first of the month would earn a little more. Total contributed is the starting amount plus every monthly payment. Total interest is the final balance minus everything paid in, which is why the two bands on the chart always add up to the balance.
| Growth applied | once a month, at the twelfth root of the AER |
|---|---|
| Contributions | added at the end of each month |
| Interest | final balance minus everything paid in |
What does a 20-year worked example look like?
Start with £5,000 and add £250 a month for 20 years at 4.5%, with interest paid monthly. Over that period the total paid in is £65,000, made up of the £5,000 starting amount plus £60,000 of monthly payments.
The estimated balance ends at about £109,308, so interest has added £44,308, or 40.5% of the total. The shape matters as much as the total. By the end of year 1 the balance is only £8,292, and interest accounts for £292 of it. By year 10 the balance is £45,634, with £10,634 of interest. The last five years alone add £35,397, of which £20,397 is interest rather than new money. Nothing about the plan changed; the balance simply got big enough for the interest to do real work.
How should the result be read?
- Rates do not stand still. Easy access rates move with the Bank of England base rate, and headline savings rates often include a bonus that drops away after a year. A single fixed rate over 20 years is a modelling convenience, not a promise.
- Inflation is not deducted. The figures are in future pounds. If prices rise at 2.5% a year, a balance of £109,308 in 20 years buys roughly what £66,708 buys today.
- Tax is not deducted from the balance. The Personal Savings Allowance check above tells you whether tax would be due, but the chart and table show the position before any tax.
- Time matters more than chasing rates. Adding five years to the plan usually moves the final figure more than finding another half a percent of interest.
Common questions
How much will £5,000 grow to in 20 years?
On this page's default figures, £5,000 plus £250 a month at 4.5% grows to about £109,308 over 20 years. Of that, £65,000 is money you paid in and £44,308 is interest, so interest makes up 40.5% of the final balance. A lump sum on its own would do less: £5,000 at 4.5% with nothing added reaches roughly £12,277.
What is compound interest?
Compound interest is interest paid on interest. In year one you earn interest on your money. In year two you earn interest on your money plus the interest already added, so the amount earning interest keeps getting bigger. Simple interest, by contrast, only ever pays on the original amount. The gap between the two is small at first and then widens sharply, which is why the green band on the chart above starts as a sliver and ends as a large slice.
Does monthly or yearly compounding make much difference?
Less than most people expect. A 5% rate compounded monthly is worth about 5.12% a year once the interest on interest is counted, against 5.00% compounded yearly. On a £10,000 balance that is roughly £12 a year. Compounding frequency is worth understanding, but the rate itself and how long you leave the money alone matter far more.
Do I pay tax on savings interest in the UK?
Often not, because of the Personal Savings Allowance. Basic rate taxpayers can earn £1,000 of savings interest a year tax free, higher rate taxpayers £500, and additional rate taxpayers get nothing. Interest above the allowance is taxed at your normal income tax rate. Interest inside an ISA does not count towards the allowance at all and is always tax free. The calculator flags the year your projected interest would break through the allowance.
Is a cash ISA better than a normal savings account?
It depends on how much interest you earn. If your interest sits comfortably inside the Personal Savings Allowance, a normal account paying a higher rate can beat an ISA paying less, because the tax bill is zero either way. Once the interest passes the allowance the ISA is usually better, and the gap grows every year as the balance builds. Rates move, so compare the actual rates on offer rather than assuming one wrapper is always better.
How long does it take to double your money?
Divide 72 by the interest rate for a quick estimate. At 4% money roughly doubles in 18 years, at 6% in 12 years, and at 9% in 8 years. The rule of 72 is an approximation that works well for rates between about 2% and 10%, and it assumes you leave the money untouched with no further payments in.
Do you pay tax on savings interest?
Often not, because of the Personal Savings Allowance set out by gov.uk. Basic rate taxpayers can earn £1,000 of interest a year tax free, higher rate taxpayers £500, and additional rate taxpayers get none. Interest above the allowance is taxed at the saver's usual income tax rate, and banks report interest paid to HMRC. Interest inside a cash ISA never counts towards the allowance and is never taxed.
How does the balance grow year by year?
The balance is estimated month by month: it is multiplied by a growth factor derived from the entered rate, then the contribution for that month is added. The table on this page shows the running total for contributions, interest and balance at the end of each year, based on the figures currently entered. Interest is small relative to contributions in the early years and grows as a share of the balance over time.
How is the compound interest figure worked out?
Each month the balance is multiplied by a growth factor and the monthly contribution is added on top. The growth factor comes from converting the entered annual rate to an effective annual rate, then taking the twelfth root so it can be applied monthly. Contributions are assumed to arrive at the end of each month. Total interest is calculated as the final balance minus everything paid in.
What does a 20-year worked example look like?
On the default figures, starting with £5,000 and adding £250 a month for 20 years at 4.5%, the total paid in is £65,000 and the estimated balance reaches about £109,308. Interest makes up 40.5% of that balance. Its share of the balance grows over time, because later years have a larger balance for the rate to act on.
How should the result be read?
As an illustration rather than a promise. It assumes a single fixed rate for the whole period, which real savings accounts and investments do not provide since rates move and no return is guaranteed. It does not deduct inflation or tax from the figures shown, so the actual spending power and the amount kept after tax will differ from the numbers on screen.
Sources & Rate Verification
Rates verified against official statutory guidance on 6 September 2026.