Compound Interest Calculator

Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. Unlike simple interest (calculated only on the principal), compound interest grows exponentially over time. For example, £10,000 at 5% compounded annually becomes £10,500 after year one, then £11,025 after year two (because you earn interest on the £500 interest as well).

More frequent compounding produces slightly higher returns because interest is calculated and added to the principal more often. For £10,000 at 5% over 10 years: annual compounding gives £16,288.95, monthly gives £16,470.09, and daily gives £16,486.65. The difference is small for moderate rates but becomes more significant with higher rates and longer time periods.

UK savings rates vary by account type. As of 2025/26, easy-access accounts typically offer 4-5% AER, fixed-rate bonds can offer 4.5-5.5%, and Cash ISAs offer similar rates tax-free (up to the £20,000 annual ISA allowance). Use this calculator to compare how different rates affect your savings growth over time. Check the Bank of England base rate and comparison sites for current best rates.