UK Inflation Calculator
Calculate how UK inflation has changed prices over time. Free CPI calculator using ONS data — compare purchasing power from any year to today.
Last updated: February 2026
Inflation Calculator - UK Inflation & Purchasing Power
Free, accurate, instant results. Updated for 2025. No signup required.
Tips for Protecting Your Money from Inflation
1. Track inflation-adjusted salary rises: Your salary needs to increase by at least the inflation rate to maintain purchasing power. If you earn £30,000 and inflation is 4% annually, you need a £31,200 salary next year just to stay even. Request inflation-matching raises in salary reviews - many UK employers now index pay rises to CPI.
2. Use high-interest savings accounts and ISAs: Cash ISAs, fixed-rate bonds, and regular savings accounts offering 4-5% interest can offset inflation. In 2024-2025, many UK banks offer 5%+ on savings due to high Bank of England base rates. Shop around - MoneySavingExpert compares rates weekly.
3. Invest in inflation-beating assets: Historically, UK property, FTSE All-Share index, and Index-Linked Gilts outpace inflation over 10+ years. Premium Bonds adjust prize fund with inflation. Stocks and shares ISAs shelter investment gains from tax. Don't leave large sums in 0% current accounts.
4. Consider NS&I Index-Linked Savings Certificates: When available, these government-backed products guarantee returns above RPI inflation. They're currently not on sale (suspended since 2011), but reopen periodically. Check NS&I website for availability - they sell out within weeks.
5. Lock in prices with fixed-rate deals: Fixed-rate mortgages, energy tariffs, and broadband contracts protect against future price rises. In 2022-2023, those on 5-year fixed mortgages saved thousands versus variable rates. But be wary - early exit fees apply if you switch.
6. Negotiate inflation clauses in contracts: Freelancers and contractors should include annual CPI-linked rate increases in long-term agreements. Landlords typically raise rent by 3-5% annually to match inflation. Employees can request contractual inflation-matched pay reviews.
7. Buy durable goods before prices rise: If inflation is accelerating and you need a car, appliances, or home improvements, buying sooner locks in current prices. However, avoid debt to do this - high interest rates negate inflation benefits. Cash purchases only.
8. Pension contributions beat inflation long-term: Workplace pensions invested in diversified funds historically return 5-7% annually, beating 2-3% long-term inflation. Employer matching contributions effectively double your money instantly. Max out employer contributions before other savings.
9. Monitor Bank of England base rate: The BoE base rate signals inflation trends. Rising rates mean the Bank is fighting inflation (expect it to fall). Falling rates mean the Bank wants to stimulate the economy (inflation may rise). Adjust your savings/investment strategy accordingly.
Common Mistakes About Inflation
Mistake 1: Thinking inflation means prices double. 3% annual inflation means prices rise 3% per year, not triple. £100 item becomes £103 after 1 year, £106.09 after 2 years, £159.27 after 15 years. Doubling takes approximately 24 years at 3% inflation (Rule of 72: 72 ÷ inflation rate = years to double).
Mistake 2: Using wrong inflation rate. Don't use average inflation when calculating specific time periods. UK inflation varies: 2020 (0.9%), 2021 (2.6%), 2022 (9.1%), 2023 (4.0%). Use actual year-by-year ONS data for historical comparisons, not assumed averages. This calculator uses compound inflation for simplicity.
Mistake 3: Ignoring personal inflation rates. Official CPI is an average. If you commute by car, your personal inflation is higher due to fuel costs. Renters face higher inflation than homeowners with fixed mortgages. Students face tuition inflation (9% annually). Calculate your personal "basket" of expenses.
Mistake 4: Confusing deflation with disinflation. Disinflation = inflation rate decreasing (e.g., from 10% to 3%), but prices still rising. Deflation = negative inflation, where prices fall (rare in UK - last occurrence 2015 briefly). Media often reports "falling inflation" when prices are still increasing, just slower.
Mistake 5: Expecting wages to automatically match inflation. UK real wages fell in 2022-2023 because pay rises (5-6%) lagged inflation (10%+). You must negotiate raises - employers don't automatically index salaries to CPI. Public sector pay is often capped below inflation, causing real-terms cuts.
Mistake 6: Keeping all savings in cash during high inflation. £10,000 in a 0% account loses £400 purchasing power per year with 4% inflation. After 10 years, you'd need £14,802 to match original purchasing power, but you still have £10,000. Diversify into investments, property, pensions to beat inflation.
Mistake 7: Thinking low inflation is always good. Deflation (negative inflation) is economically dangerous - consumers delay purchases expecting lower prices, businesses fail, unemployment rises. The Bank of England targets 2% inflation, not 0%. Moderate inflation encourages spending and investment.
Mistake 8: Using RPI when CPI is the standard. RPI typically runs 0.5-1% higher than CPI due to different calculation methods. Use CPI for most comparisons - it's the official measure. RPI is only relevant for student loans, rail fares, and some legacy contracts. Don't inflate estimates by using RPI unnecessarily.
Complete Guide to UK Inflation
What is Inflation and How is it Measured in the UK?
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. In the UK, the Office for National Statistics (ONS) measures inflation using the Consumer Price Index (CPI), which tracks the average price change of a "basket" of approximately 700 goods and services.
The CPI basket (2024-2025) includes: Food and drink (11.5% of basket), Housing costs excluding mortgages (13.2%), Transport including fuel (14.8%), Recreation and culture (12.9%), Restaurants and hotels (11.7%), Clothing (5.8%), Household goods (5.4%), Health (2.7%), Education (2.1%), Communication (2.3%), Alcohol and tobacco (3.7%), and other services. The basket is updated annually to reflect changing spending habits - recent additions include air fryers, smartwatches, and subscription services.
How This Calculator Works
The inflation calculator uses the compound interest formula to show how money's purchasing power changes over time:
Formula: Future Value = Present Value × (1 + inflation rate)^years
Example: £10,000 in 2020 with 3.5% annual inflation for 5 years:
FV = £10,000 × (1.035)^5 = £10,000 × 1.188 = £11,877
Interpretation: You need £11,877 in 2025 to buy what £10,000 bought in 2020.
Real value: If you still have £10,000, its purchasing power has fallen to £8,415 in 2020 terms (a 15.9% loss).
Bank of England Inflation Target and Monetary Policy
The Bank of England has a mandate to maintain price stability, defined as 2% CPI inflation annually. The Monetary Policy Committee (MPC), consisting of 9 members including the Governor, meets 8 times per year to set the base interest rate.
When Inflation is Too High (Above 2%)
MPC raises interest rates to make borrowing expensive and saving attractive. This reduces consumer spending and business investment, slowing price increases. In 2022-2023, rates rose from 0.1% to 5.25% to combat 11% inflation.
When Inflation is Too Low (Below 2%)
MPC cuts interest rates to encourage borrowing and spending, stimulating economic growth. In 2020 during COVID, rates fell to 0.1% with quantitative easing (printing money). Low inflation risks deflation, which is economically damaging.
Why 2% Target (Not 0%)?
Moderate inflation encourages spending (delaying purchases loses value), allows real wage adjustments without nominal cuts, and provides buffer against deflation. Most developed economies target 2% - it's the Goldilocks zone for stable economic growth.
Historical UK Inflation Rates (1990-2025)
| Period | Average CPI | Key Events |
|---|---|---|
| 1990-1999 | 3.4% | Post-recession recovery, UK exit from ERM 1992 |
| 2000-2009 | 2.1% | Bank of England independence, 2008 financial crisis |
| 2010-2019 | 2.3% | Austerity era, Brexit vote 2016, QE programme |
| 2020-2021 | 1.8% | COVID-19 pandemic, lockdowns suppress demand |
| 2022 | 9.1% | Cost of living crisis, Russia-Ukraine war energy shock |
| 2023 | 7.3% | Inflation peaks at 11.1% (Oct 2022), gradual decline |
| 2024-2025 | 3-4% | Return towards 2% target, base rate remains elevated 4.5-5% |
CPI vs RPI vs CPIH: Understanding UK Inflation Measures
CPI (Consumer Price Index): Official measure used by Bank of England for inflation target. Excludes housing costs like mortgage interest and council tax. Based on international standards (HICP). Used for benefits uprating, minimum wage adjustments, pension increases. Most commonly quoted in media.
RPI (Retail Price Index): Older measure (1947-present) that includes housing costs. Typically 0.5-1% higher than CPI. No longer an official statistic since 2013, but still used for student loan interest, rail fares, index-linked gilts, some private pensions. Being phased out - reformed to align with CPIH by 2030.
CPIH (CPI including Housing): ONS's preferred measure since 2017. Adds owner-occupier housing costs to CPI using rental equivalence method. Represents 86% of UK household spending. Generally 0.2-0.5% higher than CPI. May become official target in future.
Which to use? Use CPI for general comparisons, salary negotiations, and understanding Bank of England policy. Use RPI only if specifically referenced in your contract (student loan, pension, rail season ticket). Use CPIH for true cost-of-living analysis if you're a homeowner.
Real-World UK Inflation Applications
Salary negotiations: If you earned £35,000 in 2020 and it's now 2025 with 18% cumulative inflation, you need £41,300 to maintain the same purchasing power. Anything less is a real-terms pay cut. UK public sector workers faced this in 2023 when 4% pay rises lagged 10% inflation, triggering strikes.
Pension planning: State Pension increases by triple lock (highest of inflation, earnings growth, or 2.5%). In 2025/26, full State Pension is £221.20/week (£11,502/year). With 2% inflation over 20 years, £10,000 annual pension needs £14,859 to maintain value. Private pensions may not have inflation protection.
Property investment: UK house prices historically rise 5-7% annually, outpacing 2-3% long-term inflation. A £200,000 house in 2000 would cost £486,000 in 2025 (7% annual growth). However, 2022-2023 saw price falls despite high inflation due to mortgage rate increases.
Student loans: Plan 2 loans (post-2012) charge RPI + 3% while studying (capped at 7.6% in 2024). Inflation determines whether your loan balance grows faster than you repay. High earners can pay off loans; average earners see balances cancelled after 30 years (inflation-adjusted).
Frequently Asked Questions
How accurate is this calculator?
This calculator uses the compound interest formula, which is the standard method for inflation calculations. It assumes constant annual inflation, which simplifies real-world fluctuations. For general estimates (salary planning, savings targets), it's highly accurate. For precise historical calculations, use ONS data with actual year-by-year inflation rates.
Is this calculator free?
Yes! Completely free with no signup, no hidden fees, and unlimited calculations. No ads, no data collection, no catches. Use it as often as you need for personal or professional financial planning.
Can I use this on mobile?
Absolutely! This calculator is fully responsive and works perfectly on smartphones, tablets, and desktop computers. The interface adapts to your screen size for easy input and readability on any device.
What inflation rate should I use for future projections?
For long-term UK projections, use 2% (Bank of England target). For near-term estimates (2024-2025), use 3-4% (current trajectory). For pessimistic scenarios, use 4-5%. For historical comparisons, check ONS data for actual rates. The calculator defaults to 3.5%, a balanced estimate for 2020-2025.
Inflation and Personal Finance Strategies
Salary Negotiation in Inflationary Times
UK public sector workers experienced real-terms pay cuts in 2022-2023 when 4-5% pay rises lagged 10% inflation. Private sector workers fared better - average pay rises 6-7% but still below inflation. To maintain purchasing power, your salary must rise by at least the inflation rate. For example, if you earned £30,000 in 2022 and it's now 2025 with cumulative inflation of 18%, you need £35,400 just to stay even. If you now earn £33,000, you've had a 6.7% real-terms pay cut.
Negotiation strategy: Present CPI data to your employer. Show that your current salary in real terms has fallen. Request inflation-matching rises as minimum, then negotiate performance increases on top. Many UK employers now index pay rises to CPI automatically - if yours doesn't, request it. Trade unions use CPI figures extensively in pay negotiations. Public sector strikes 2023 centered on inflation-matching pay demands.
Mortgage and Property in High-Inflation Periods
High inflation typically triggers Bank of England interest rate rises, which increase mortgage costs. The base rate rose from 0.1% (Dec 2021) to 5.25% (Aug 2023) to combat inflation. Variable rate mortgage holders saw payments double - a £200,000 mortgage went from £600/month to £1,200/month. Fixed-rate mortgage holders were protected until their deal expired.
Fixed vs variable strategy: In low-inflation, low-interest environments (2009-2021), variable rates were optimal. In high-inflation periods, fixed rates protect you from rate rises. The 2022-2023 "mortgage time bomb" saw 1.4 million UK households remortgaging from 2% fixed deals onto 5-6% rates - monthly payments rose 150-200%. Fixing for 5-10 years insulates you from Bank of England rate volatility.
Property as inflation hedge: UK house prices historically rise 5-7% annually, outpacing 2-3% long-term inflation. From 2000-2025, average UK house prices rose from £100,000 to £290,000 (190% increase), while cumulative inflation was 85%. Property ownership beats inflation over decades, though 2008 and 2022-2023 saw temporary price falls. Buy-to-let landlords benefit doubly - rents rise with inflation while property values appreciate.
Pension Planning and Inflation Protection
UK State Pension increases by "triple lock": highest of inflation (CPI), average earnings growth, or 2.5%. In 2025/26, full State Pension is £221.20/week (£11,502/year). The triple lock protects pensioners from inflation, but it's politically controversial - costs taxpayers £11 billion extra per year compared to earnings-only indexing. Some governments have suspended it temporarily (2021-2022 COVID anomaly).
Workplace pensions: Most private sector pensions don't have inflation protection. If you retire at 65 with £30,000/year pension and live to 90, you'll need that pension to maintain purchasing power for 25 years. At 2% inflation, your £30,000 needs to become £49,200 by age 90 to buy the same goods. Many UK pensioners see real income fall over retirement. Final salary pensions often cap inflation increases at 2.5-5% annually - check your scheme rules.
Annuities vs drawdown: Level annuities pay fixed income - great if inflation stays low, disastrous if it rises. Inflation-linked annuities start lower but increase with CPI - better long-term protection. Drawdown keeps money invested in stocks/bonds, which historically beat inflation. The 4% rule (withdraw 4% of pension pot annually) assumes investments grow faster than inflation. 2022-2023 high inflation challenged this assumption.
Investment Strategies to Beat UK Inflation
Stocks and shares ISAs: FTSE All-Share index returned 7-8% annually (long-term average) vs 2-3% inflation. £10,000 invested in 2000 would be £40,000 in 2025 (7% annualized), while inflation only requires £18,500. Tax-free gains in ISA wrapper (£20,000 annual allowance 2025/26). Diversify across UK and international equities - don't hold only FTSE 100.
Index-Linked Gilts: UK government bonds where principal and interest increase with RPI inflation. Safe but returns are low - currently yielding RPI + 0.5%. Good for risk-averse investors needing inflation protection. Available through ISAs or directly from government. Institutional investors (pension funds) hold large quantities.
Property and REITs: UK residential property averages 5-7% annual growth. Real Estate Investment Trusts (REITs) offer exposure to commercial property with better liquidity than direct ownership. REITs must distribute 90% of rental income as dividends. Commercial property rents typically indexed to inflation in lease agreements.
Commodities and gold: Gold traditionally viewed as inflation hedge, but volatile. Rose from $300/oz (2000) to $2,000+ (2024), outpacing inflation. However, long periods of underperformance (2011-2020). Oil, agricultural commodities also inflation-sensitive. Accessible through commodity ETFs in ISAs. Not recommended as sole investment - diversify.
Cash and fixed income: High-interest savings accounts (5%+ in 2024) and fixed-rate bonds can match inflation temporarily. But when inflation falls and Bank of England cuts rates, savings rates drop too. Cash is inflation-losing asset over long term - £10,000 saved in 2000 is worth £5,400 in 2025 terms (inflation-adjusted). Use cash for emergency fund (3-6 months expenses) only.
Historical UK Inflation Crises and Lessons
1970s stagflation: UK inflation peaked at 24.2% (1975) due to oil crisis, wage-price spirals, and weak pound. Interest rates hit 15%. "Winter of Discontent" (1978-79) saw widespread strikes over pay. Real wages fell dramatically. Property prices stagnated despite high nominal inflation - "stagflation" (inflation + economic stagnation). Government spending cuts and Thatcher policies eventually tamed inflation by 1982, but at cost of mass unemployment.
1990s ERM crisis: UK joined European Exchange Rate Mechanism (1990) requiring 2% inflation target, but economy was overheating. Interest rates hiked to 15% to defend pound's ERM parity. "Black Wednesday" (Sept 1992) saw UK forced out of ERM after billions spent defending sterling. Lesson: external constraints can conflict with domestic inflation management. Bank of England independence (1997) gave MPC sole focus on inflation targeting.
2008 financial crisis: Inflation fell to 1.1% (2009) as recession suppressed demand. Bank of England cut rates to 0.5%, introduced quantitative easing (£375 billion money creation). Fear of deflation (Japan-style lost decade). Inflation rose to 5.2% (2011) due to VAT increase and commodity prices, but fell back to 2% by 2015. QE criticized for inflating asset prices (property, stocks) while wage growth stagnated - inequality increased.
2020-2023 cost of living crisis: COVID-19 lockdowns (2020) caused inflation to fall to 0.9%. Massive government spending (furlough, business support) and QE expansion. Supply chain disruptions, energy crisis (Russia-Ukraine war), and post-lockdown demand surge drove inflation to 11.1% (Oct 2022) - highest since 1981. Bank of England raised rates from 0.1% to 5.25%. Real wages fell 3-5% in 2022-2023. Food inflation hit 19% (March 2023). Government energy price cap limited household impact.
Related Calculators
Expert Reviewed — This calculator is reviewed by our team of financial experts and updated regularly with the latest UK tax rates and regulations. Last verified: February 2026.
Last updated: February 2026 | Verified with latest UK rates
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Understanding Your Results
Our Inflation Calculator provides:
- Instant calculations - Results appear immediately
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How to Use This Inflation Calculator
- Enter an amount in pounds (£): Type the monetary value you want to adjust for inflation. This can be a salary, a purchase price, savings balance, or any amount you want to compare across different time periods.
- Select a start year: Choose the year your amount originates from. For example, if you want to know what a 2010 salary is worth today, select 2010 as your start year.
- Select an end year: Choose the year you want to compare to. This is typically the current year (2025 or 2026), but you can also project into the future to estimate how inflation may erode your money's value.
- View the equivalent value adjusted for inflation: After clicking "Calculate Now", the result shows how much money you would need in the end year to have the same purchasing power as your original amount in the start year.
- Understand the cumulative inflation rate shown: The calculator displays the total percentage increase over the period, the year-by-year breakdown, and the purchasing power loss. Use these figures for salary negotiations, financial planning, or understanding how the cost of living has changed.
Worked Examples: UK Inflation Calculations
All figures below are approximate and based on historical CPI/RPI data from the ONS. Actual values may vary slightly depending on the specific inflation index and methodology used.
Example 1: General Price Inflation Over 25 Years
£100 in 2000 is worth approximately £196 in 2025. That represents roughly 96% cumulative inflation over 25 years, or an average annual inflation rate of approximately 2.7%. This means that goods and services costing £100 at the turn of the millennium would cost nearly double today.
Example 2: Salary Purchasing Power (2015 to 2025)
A £50,000 salary in 2015 would need to be approximately £67,500 in 2025 to maintain the same purchasing power. That is roughly 35% cumulative inflation over the decade. If your salary has not risen by at least 35% since 2015, you have experienced a real-terms pay cut.
Example 3: Property Price Adjustment (2010 to 2025)
A £250,000 house in 2010 would cost approximately £380,000 in 2025 when adjusted for general CPI inflation alone (roughly 52% cumulative). Note: actual UK house prices often rise faster than general CPI inflation due to supply constraints and demand factors, so this figure reflects only general price-level changes, not the housing market specifically.
Example 4: Long-Term Inflation Over 50 Years
£1 in 1975 is worth approximately £9.50 in 2025, reflecting roughly 850% cumulative inflation over 50 years. This dramatic change illustrates the power of compounding inflation over long periods and why long-term savings and pensions must account for inflation to preserve their real value.
UK CPI Inflation Rate – Year-by-Year Historical Data
Official ONS Consumer Price Index (CPI) annual rates and Bank of England base rates. Data source: ONS CPI Dataset & Bank of England Statistics.
| Year | CPI Annual Rate | RPI Annual Rate | BoE Base Rate (Year End) | Key Economic Event |
|---|---|---|---|---|
| 2015 | 0.0% | 0.9% | 0.50% | Oil price crash; brief deflationary period |
| 2016 | 0.7% | 1.8% | 0.25% | Brexit vote; pound falls, import costs rise |
| 2017 | 2.7% | 3.6% | 0.50% | Post-Brexit pound weakness feeds import inflation |
| 2018 | 2.5% | 3.3% | 0.75% | BoE raises rates; oil prices recover |
| 2019 | 1.8% | 2.6% | 0.75% | Brexit uncertainty; rates held steady |
| 2020 | 0.9% | 1.5% | 0.10% | COVID-19 pandemic; BoE cuts to 0.1% historic low |
| 2021 | 2.5% | 4.8% | 0.25% | Post-lockdown demand surge; supply chain disruption |
| 2022 | 9.1% avg | 12.6% | 3.50% | Peak: 11.1% Oct 2022. Russia-Ukraine energy crisis; highest since 1981 |
| 2023 | 6.7% avg | 9.0% | 5.25% | Food inflation peaks 19% (Mar); gradual decline through year |
| 2024 | 2.5% avg | 3.5% | 4.75% | Inflation falls toward target; BoE begins rate cuts |
| 2025 | 3.0% est. | 3.8% est. | 4.50% | Gradual return toward 2% BoE target; rates easing |
Sources: ONS Consumer Price Inflation datasets; Bank of England statistical release. Annual averages used. 2025 figures are estimates based on data available to February 2026.
Salary Inflation Calculator UK – Has My Wage Kept Up?
Enter your salary from a previous year and your current salary to see whether your wages have kept pace with UK CPI inflation — or whether you have experienced a real-terms pay cut.
How we calculate this: We apply cumulative UK CPI inflation from the ONS to your past salary to find what it is worth in today's money. Real-terms change = (current salary / inflation-adjusted past salary) - 1. CPI data: ONS, Bank of England. Base year: 2025.
What is Inflation? A Complete UK Guide
Inflation is the sustained increase in the general price level of goods and services in an economy over time. When inflation occurs, each pound you hold buys fewer goods and services than it did before — economists call this a fall in the purchasing power of money. Understanding inflation is essential for every aspect of UK personal finance, from negotiating your salary and managing your savings to planning for retirement and understanding your mortgage.
RPI vs CPI vs CPIH: Which UK Inflation Measure Matters to You?
The UK uses three primary inflation indices, and choosing the wrong one can skew your calculations significantly:
CPI (Consumer Price Index)
The official Bank of England target measure since 2003. Tracks approximately 700 goods and services. Excludes mortgage interest payments and council tax. Used for uprating benefits, the State Pension, and the National Living Wage. Published monthly by the ONS. This is the rate quoted in news headlines.
RPI (Retail Price Index)
An older measure (introduced 1947) that includes housing costs such as mortgage interest payments. Typically runs 0.5–1.5% higher than CPI. No longer an official National Statistic since 2013. Still legally required for student loan interest (Plan 2), rail fare rises, and some index-linked government bonds. Being reformed to align with CPIH by 2030.
CPIH (CPI Including Housing)
The ONS preferred measure since 2017. Extends CPI by adding owner-occupier housing costs using a "rental equivalence" approach — estimating what it would cost to rent your own home. Covers approximately 86% of UK household expenditure. Sits between CPI and RPI. Likely to become the BoE's formal target in future.
Quick Rule: Use CPI for salary negotiations and general cost-of-living analysis. Use RPI only if your contract, loan, or pension specifies it. Use CPIH for the most accurate housing-inclusive measure.
How the Bank of England Targets 2% Inflation
The Bank of England's Monetary Policy Committee (MPC) has a statutory mandate, set by the UK Government, to maintain CPI inflation at 2% per year. This target is not arbitrary — 2% provides a buffer above zero to avoid the dangers of deflation, while being low enough to prevent the economic distortions caused by high inflation.
The MPC's primary tool is the Bank Rate (base rate). When inflation rises above 2%:
- The MPC raises the base rate, making borrowing more expensive
- Mortgage repayments increase, reducing disposable income and consumer spending
- Business loan costs rise, slowing investment and hiring
- Savings rates improve, encouraging people to save rather than spend
- Collectively, these effects reduce "aggregate demand" — the total spending in the economy — which pulls prices back down
This mechanism was dramatically demonstrated in 2022–2023 when the MPC raised the base rate from 0.1% (its historic low during COVID) to 5.25% in just 18 months — the fastest tightening cycle in 30 years — to combat inflation that peaked at 11.1% in October 2022.
How Inflation Affects Your Savings, Mortgage, and Wages
Savings
Inflation erodes cash savings. If your savings account pays 3% interest but inflation is 4%, your money loses 1% purchasing power each year. £10,000 that "earns" £300 interest actually buys less after 12 months. The real interest rate = nominal rate minus inflation rate. During 2022–2023, most UK savers faced strongly negative real returns even as the BoE raised rates.
Mortgages
High inflation triggers BoE rate rises, which feed directly into variable and tracker mortgage rates. A £200,000 mortgage at 2% costs £848/month; at 5.5% it costs £1,228/month — a £380/month increase. Fixed-rate mortgages protect you during rate-rise cycles. However, inflation does benefit borrowers long-term — the real value of your mortgage debt falls as inflation rises.
Wages
When wage growth lags inflation, workers suffer real-terms pay cuts. In 2022, UK private sector pay rose 6.4% — but with CPI at 9.1%, real wages fell 2.7%. Public sector workers fared worse: NHS staff received 3% rises against 10% inflation. The UK saw its sharpest fall in real wages since records began in 2022–2023. Use our salary inflation calculator above to check your position.
The 2022 UK Inflation Crisis: What Happened and Why
The 2022–2023 cost-of-living crisis was the most severe inflation episode the UK had experienced since the early 1980s. Several interconnected factors combined to push CPI to 11.1% in October 2022:
- Russia-Ukraine war and energy shock (2022): Russia's invasion of Ukraine in February 2022 caused European gas prices to surge 400% within months. The UK, which imports significant natural gas, saw household energy bills double under the Ofgem price cap. The energy price cap rose from £1,277/year (April 2021) to £2,500/year under the Energy Price Guarantee (October 2022).
- Post-COVID supply chain disruption: Global lockdowns (2020–2021) created bottlenecks in manufacturing, shipping, and logistics. Semiconductor shortages, port congestion, and reduced HGV driver numbers (partly Brexit-related) restricted the supply of goods just as pandemic savings fuelled demand.
- Brexit's structural effect: New trade barriers with the EU increased costs for UK importers, contributing an estimated 0.5–1.5% to food inflation. EU workers returning home during COVID were not replaced, creating persistent labour shortages in hospitality, agriculture, and transport.
- Pandemic monetary stimulus: The Bank of England expanded its quantitative easing programme by £450 billion in 2020–2021, while the Government borrowed £400 billion for COVID support. This monetary expansion, while necessary, contributed to inflationary pressures when the economy reopened.
- Food price inflation: UK food inflation peaked at 19.2% in March 2023 — the highest in 45 years — driven by high energy costs in food production, Ukrainian grain supply disruption, and UK-specific labour and logistics issues.
By early 2024, CPI had fallen back towards 3% as energy prices normalised, supply chains recovered, and BoE rate rises reduced demand. However, services inflation remained sticky at 5–6%, reflecting persistent labour market tightness.
Frequently Asked Questions About UK Inflation
Sources & Methodology
Official Data Sources
- ONS Consumer Price Inflation — The Office for National Statistics publishes monthly CPI, CPIH, and RPI data for the United Kingdom, including historical series and detailed breakdowns by category.
- Bank of England Inflation Calculator — The Bank of England provides its own inflation calculator using composite historical price indices stretching back to 1209.
CPI vs RPI: Which Measure Do We Use?
The Consumer Price Index (CPI) has been the UK's official inflation measure since 2003 and is used by the Bank of England for its 2% inflation target. CPI excludes mortgage interest payments and council tax. The older Retail Price Index (RPI) includes housing costs and typically runs 0.5-1% higher than CPI. RPI is no longer classified as a National Statistic (since 2013) due to methodological shortcomings, but it remains in use for certain contracts, student loan interest, and rail fare increases. This calculator uses a compound inflation formula based on a user-specified annual rate; for the most accurate historical comparisons, we recommend referencing actual year-by-year CPI data from the ONS.
Current Inflation Context
As of early 2026, UK CPI inflation stands at approximately 3%, having fallen significantly from its peak of 11.1% in October 2022 during the cost-of-living crisis. The Bank of England's target remains 2% annual CPI inflation, and the Monetary Policy Committee continues to adjust the base interest rate to steer inflation back towards that target.
Disclaimer
This calculator provides estimates for informational and educational purposes only. Results are based on a constant annual inflation rate applied using the compound interest formula and may not reflect actual year-by-year CPI or RPI fluctuations. For precise historical comparisons, consult the ONS or Bank of England data linked above. This tool does not constitute financial advice. Always consult a qualified financial adviser before making decisions based on inflation projections.