Compound Interest Calculator
See how your savings or investments grow over time with the magic of compound interest. Includes regular monthly contributions and multiple compounding frequencies.
✓ Monthly contributions✓ Multiple frequencies✓ Year-by-year breakdown
Last updated: April 2026
What is compound interest?
Compound interest is the interest you earn on both your original deposit and on the interest already accumulated. Albert Einstein reportedly called it the "eighth wonder of the world" — over long timeframes, it dramatically outperforms simple interest.
The standard formula is A = P(1 + r/n)nt, where P is principal, r is annual rate, n is compounds per year, and t is years.
UK savings tax
Interest in regular savings accounts is taxable above the Personal Savings Allowance:
- £1,000 tax-free for basic-rate taxpayers
- £500 tax-free for higher-rate taxpayers
- £0 for additional-rate taxpayers
Interest in ISAs is always tax-free, with a £20,000 annual ISA allowance for 2025/26.
Frequently asked questions
What's the difference between AER and gross rate?
AER (Annual Equivalent Rate) shows what you'd earn over a year if interest is compounded — it makes accounts comparable. The gross rate is the headline rate before compounding. For monthly compounding at 5% gross, the AER is approximately 5.12%.
Are stocks and shares ISAs better than cash ISAs?
For long-term goals (10+ years), stocks and shares ISAs have historically outperformed cash. The UK stock market has averaged about 7% annually with dividends reinvested. But they fluctuate. Cash ISAs are safer but rarely beat inflation.
Related calculators