› Calculators › Interest Rate Calculator

Interest Calculator UK | Savings, Compound Interest & Investment Returns

Free interest rate calculator for savings, loans and investments. Calculate simple and compound interest, compare APR vs AER, and project growth over any...

Last updated: March 2026

Reviewed by UK Tax Experts · Updated March 2026 · ✓ HMRC Compliant
← Back to Finance Calculators

Interest Calculator UK

Calculate compound interest, savings growth, and investment returns. Includes UK-specific features like Personal Savings Allowance tracking and ISA calculations.

Bank of England Base Rate Context

The BoE base rate influences all UK savings rates. When base rate is high (e.g., 5.25%), savings accounts offer better returns. Compare your rate to the base rate to ensure you're getting a competitive deal.

Compound Interest Calculator

Your starting amount
Regular monthly deposits
Use AER for accuracy

Simple Interest Calculator

Simple interest is calculated only on the original principal, not on accumulated interest. Useful for comparing with compound interest or for loans.

Savings Goal Calculator

Calculate how much you need to save monthly to reach your financial goal, or how long it will take with your current savings rate.

Your target amount

Interest Rate Comparison

Compare how different interest rates affect your savings over time. See the impact of even small rate differences.

Understanding Compound Interest

Compound interest is often called "interest on interest" because you earn returns not just on your original deposit, but also on the interest you've already accumulated. This creates an exponential growth effect that becomes more powerful over time.

The Compound Interest Formula

A = P(1 + r/n)nt + PMT × [((1 + r/n)nt - 1) / (r/n)]

Where:

  • A = Final amount (what you'll have at the end)
  • P = Principal (your initial deposit)
  • r = Annual interest rate (as a decimal, so 5% = 0.05)
  • n = Number of times interest compounds per year (12 for monthly)
  • t = Time in years
  • PMT = Regular monthly payment/contribution

The Power of Compounding: A UK Example

Consider investing £10,000 at 5% AER with £200 monthly contributions:

  • After 10 years: £44,677 (£34,000 deposits + £10,677 interest)
  • After 20 years: £105,852 (£58,000 deposits + £47,852 interest)
  • After 30 years: £199,317 (£82,000 deposits + £117,317 interest)

Notice how the interest earned accelerates dramatically—this is the magic of compound interest!

Simple Interest vs Compound Interest

Simple interest is calculated only on the original principal. £10,000 at 5% simple interest earns exactly £500 every year, giving you £15,000 after 10 years.

Compound interest (monthly) on the same amount gives you £16,470 after 10 years—that's £1,470 more, or 29% extra interest, just from compounding!

The Rule of 72

Want to know how long it takes your money to double? Divide 72 by your interest rate:

  • At 4%: Money doubles in ~18 years (72 ÷ 4)
  • At 5%: Money doubles in ~14.4 years (72 ÷ 5)
  • At 6%: Money doubles in ~12 years (72 ÷ 6)
  • At 8%: Money doubles in ~9 years (72 ÷ 8)

UK Savings Account Guide

Personal Savings Allowance (PSA)

The PSA lets you earn interest tax-free up to certain limits:

Tax Band Income Range (2025/26) Tax-Free Interest
Basic Rate (20%) £12,571 - £50,270 £1,000
Higher Rate (40%) £50,271 - £125,140 £500
Additional Rate (45%) Over £125,140 £0

Understanding AER vs Gross Rate

AER (Annual Equivalent Rate): Shows the true annual return including the effect of compounding. Use this to compare accounts fairly.

Gross Rate: The simple stated rate before compounding. A 5% gross rate compounded monthly = 5.12% AER.

Net Rate: Rate after tax (rarely used now since banks pay gross since 2016).

Types of UK Savings Accounts

Account Type Typical Rate (2024) Access Tax Status
Easy Access Savings 4.5% - 5.2% AER Instant PSA applies
Notice Accounts (90-day) 4.8% - 5.4% AER 90 days notice PSA applies
Fixed Rate Bonds (1 year) 4.8% - 5.3% AER Fixed term PSA applies
Cash ISA 4.5% - 5.3% AER Varies Always tax-free
Regular Saver 5.0% - 8.0% AER Usually 12 months PSA applies

ISA Allowance (2025/26)

The annual ISA allowance is £20,000, which can be split between:

  • Cash ISAs
  • Stocks & Shares ISAs
  • Innovative Finance ISAs
  • Lifetime ISAs (£4,000 max sub-limit, age 18-39)

All interest and growth in ISAs is completely tax-free forever, regardless of amount.

7 Tips for Maximising UK Savings Interest

  • Compare using AER, not gross rate: The Annual Equivalent Rate shows the true return after compounding. A 4.9% AER beats a 5% gross rate that compounds annually.
  • Use your ISA allowance first: If you're likely to exceed your Personal Savings Allowance, prioritise ISAs for tax-free growth. The £20,000 annual allowance is valuable.
  • Consider fixed rates when rates are high: Lock in good rates with fixed bonds before they drop. If the BoE base rate falls, easy access rates will follow.
  • Split savings strategically: Keep an emergency fund in easy access (3-6 months expenses), then put longer-term savings in higher-rate fixed accounts.
  • Check bonus rates expire: Many easy access accounts offer an introductory bonus for 12 months. Diary when it expires and switch to avoid rate drops.
  • Compound frequency matters: Monthly compounding beats annual. Over 10 years at 5%, monthly compounding earns ~2.5% more total interest.
  • Don't forget NS&I: National Savings & Investments are 100% government-backed and sometimes offer competitive rates, especially Premium Bonds for tax-free prizes.

7 Common Savings Interest Mistakes

  • Leaving money in low-rate accounts: Many UK current accounts pay 0-1%. Even with FSCS protection, your money loses value to inflation. Always move savings to dedicated accounts.
  • Ignoring inflation: If inflation is 4% and your savings earn 3%, you're losing purchasing power. Aim for rates that at least match inflation.
  • Not understanding the PSA: Many people don't realise they have a tax-free interest allowance. Track your total interest across all accounts to stay within limits.
  • Choosing accounts by rate alone: Check for withdrawal limits, notice periods, minimum balances, and whether rates are fixed or variable.
  • Exceeding FSCS protection limits: The Financial Services Compensation Scheme covers £85,000 per banking group. Spread larger sums across different banks.
  • Missing ISA deadlines: The ISA allowance expires on 5 April each year. Unlike pensions, you can't carry forward unused allowance.
  • Forgetting regular saver account rules: High-rate regular savers often limit monthly deposits and penalise withdrawals. Read the terms carefully.

Frequently Asked Questions

How is compound interest calculated on UK savings? +
Compound interest is calculated using the formula A = P(1 + r/n)^(nt), where P is your principal (initial deposit), r is the annual interest rate as a decimal, n is how many times interest compounds per year (12 for monthly, 365 for daily), and t is the number of years. Most UK savings accounts compound monthly or daily. Banks display the AER (Annual Equivalent Rate) which shows your true annual return including compounding—use this to compare accounts fairly.
What is a good savings interest rate in the UK in 2025/26? +
As of late 2024, competitive UK savings rates are: Easy access accounts 4.5-5.2% AER, notice accounts 4.8-5.4% AER, 1-year fixed bonds 4.8-5.3% AER, and Cash ISAs 4.5-5.3% AER. The Bank of England base rate (5.25% in late 2024) influences all savings rates—when it rises, savings rates typically follow. A "good" rate is one that matches or beats inflation and is within 0.5% of the best available rates in its category.
What is the Personal Savings Allowance in the UK? +
The Personal Savings Allowance (PSA) allows UK taxpayers to earn interest tax-free up to: £1,000 for basic rate taxpayers (20% tax band), £500 for higher rate taxpayers (40% tax band), and £0 for additional rate taxpayers (45% tax band). Interest above these limits is taxed at your marginal rate. Note: ISA interest is completely separate and always 100% tax-free, regardless of amount. The PSA only applies to non-ISA savings interest.
What is the difference between AER and gross interest rate? +
AER (Annual Equivalent Rate) includes the effect of compounding, showing your true yearly return if interest were compounded and credited once per year. Gross rate is the simple stated rate before compounding. For example, a 5% gross rate compounded monthly has an AER of 5.12%. UK banks must display AER by law so you can compare accounts on equal terms. Always use AER when comparing savings accounts.
How much interest will I earn on £10,000 in the UK? +
At 5% AER with monthly compounding, £10,000 earns approximately £511.62 in the first year. Over 5 years (no additional deposits), you'd have £12,834 (£2,834 interest). Over 10 years, £16,470 (£6,470 interest). In an ISA, all this interest is tax-free. In a standard savings account, basic rate taxpayers can earn up to £1,000 per year tax-free under the Personal Savings Allowance—you'd only exceed this with savings over about £20,000 at 5%.
Should I choose fixed-rate or easy access savings in the UK? +
Fixed-rate bonds typically offer 0.3-0.7% higher interest than easy access accounts but lock your money for 1-5 years. Choose fixed if: you definitely won't need the money before maturity, you want to lock in current high rates before they potentially drop, or you prefer guaranteed returns. Choose easy access if: you might need the money, you believe interest rates will rise further, or you need an emergency fund. Many people use both—easy access for emergencies, fixed for longer-term goals.
How does the ISA allowance work for savings interest? +
The ISA allowance is £20,000 per tax year (2025/26), which can be split between Cash ISAs, Stocks & Shares ISAs, Innovative Finance ISAs, and Lifetime ISAs (£4,000 sub-limit). All interest earned in any ISA is completely tax-free forever—it doesn't count toward your Personal Savings Allowance. You can pay into multiple types of ISA in one year, but only one Cash ISA. You can transfer between providers without affecting your allowance. Unused allowance doesn't carry forward—use it before 5 April or lose it.
What is the Rule of 72 for investment growth? +
The Rule of 72 is a quick mental calculation to estimate how long it takes for money to double at compound interest. Divide 72 by your annual interest rate to get the approximate years. At 6% interest, money doubles in about 12 years (72÷6=12). At 4%, it takes 18 years. At 8%, just 9 years. This helps set realistic expectations—if you want £100,000 from £50,000 at 5% with no contributions, you're looking at about 14 years (72÷5≈14.4).
What is the Bank of England base rate in 2025/26? +
The Bank of England base rate was 4.5% as of early 2025, having been reduced from its peak of 5.25% in August 2024. The base rate influences savings rates, mortgage rates and personal loan rates across the UK.
What is the difference between simple and compound interest? +
Simple interest is calculated on the principal only. Compound interest is calculated on the principal plus accumulated interest — your interest earns interest. Compound interest grows much faster over time.
What is the AER (Annual Equivalent Rate)? +
The AER shows the true annual interest rate for savings accounts, accounting for compounding. It lets you compare accounts that compound at different frequencies (daily, monthly, annually) on a like-for-like basis.
What is the APRC for mortgages? +
The Annual Percentage Rate of Charge (APRC) shows the total cost of a mortgage per year, including interest, arrangement fees and other mandatory charges. Useful for comparing mortgages with different fee structures.
How often does interest compound on UK savings accounts? +
Most UK savings accounts compound monthly or annually. Daily compounding is offered by some accounts and gives slightly higher returns. The AER allows fair comparison regardless of compounding frequency.
What is the personal savings allowance for 2025/26? +
Basic rate taxpayers can earn £1,000/year in savings interest tax-free. Higher rate taxpayers get £500. Additional rate taxpayers get no allowance. Interest above these amounts is added to taxable income.

Official UK Resources

Bank of England

Official base rate decisions that influence all UK savings rates. Updated 8 times per year by the Monetary Policy Committee.

BoE Base Rate →

MoneyHelper

Free government-backed financial guidance including savings advice, ISA information, and retirement planning.

MoneyHelper Savings →

HMRC - Savings Interest

Official guidance on tax on savings interest, Personal Savings Allowance, and how to report interest.

HMRC Savings Tax →

FSCS Protection

Financial Services Compensation Scheme - confirms your savings are protected up to £85,000 per banking group.

FSCS Savings Protection →

NS&I

National Savings & Investments - 100% government-backed savings including Premium Bonds and fixed-rate bonds.

NS&I Savings →

FCA

Financial Conduct Authority - check if your savings provider is authorised and regulated.

FCA Savings Guide →

Related Calculators

Savings Calculator

General savings planning tool

ISA Calculator

Tax-free ISA projections

Mortgage Calculator

Calculate mortgage interest

Loan Calculator

Calculate loan repayments

Retirement Calculator

Plan your retirement savings

All Calculators

Browse all UK calculators

About This Interest Calculator

This comprehensive UK interest calculator is designed specifically for British savers and investors. It handles compound interest, simple interest, savings goals, and rate comparisons—all with UK-specific features like Personal Savings Allowance tracking and ISA considerations.

The calculator uses the standard compound interest formula with adjustments for different compounding frequencies (daily, monthly, quarterly, annual). It correctly calculates the effective Annual Equivalent Rate (AER) so you can see your true returns. The Personal Savings Allowance tracker helps you understand whether your interest will be taxable.

Created and maintained by UK Calculator, this tool is part of the UK Calculator suite—free, privacy-focused financial calculators designed specifically for United Kingdom residents. All calculations are performed locally in your browser; no personal or financial data is sent to any server.

Disclaimer: This calculator is for illustrative purposes only and should not be considered financial advice. Interest rates change frequently, and actual returns may vary. Tax rules are subject to change. For personalised financial advice, consult a qualified financial adviser authorised by the FCA.

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: March 2026 | Verified with latest UK rates

Data Sources: This calculator uses current Bank of England base rate and standard compound interest formulas. Calculations are based on Bank of England base rate.
Pro Tips for Accurate Results
  • Double-check your input values before calculating
  • Use the correct unit format (metric or imperial)
  • For complex calculations, break them into smaller steps
  • Bookmark this page for quick future access
Understanding Your Results

Our Interest Rate Calculator provides:

  • Instant calculations - Results appear immediately
  • Accurate formulas - Based on official UK standards
  • Clear explanations - Understand how results are derived
  • 2025/26 updated - Using current rates and regulations
Common Questions

Is this calculator free?

Yes, all our calculators are 100% free to use with no registration required.

Are the results accurate?

Our calculators use verified formulas and are regularly updated for accuracy.

Can I use this on mobile?

Yes, all calculators are fully responsive and work on any device.

People Also Ask

Yes, our calculators use verified formulas and are regularly updated with current UK rates and regulations. Results are provided for guidance - always consult professionals for major financial decisions.

Absolutely! All our calculators are fully responsive and work perfectly on smartphones, tablets, and desktops. No app download needed.

We update all calculators with new rates as soon as they're announced - typically at the start of each tax year (April) or when significant changes occur.

HMRC Compliant
Secure & Private
190+ Calculators
Always Free

Embed This Calculator on Your Website

Free to use. Copy the code below and paste it into your website HTML.

UK

UK Calculator Editorial Team

Our calculators are maintained by qualified accountants and financial analysts. All tools use official HMRC, ONS, and NHS data. Learn more about our team.

Related Calculators