Savings Growth Calculator
Compound Interest Calculator
Calculate how your savings will grow over time with compound interest.
ISA Allowance Planner 2025/26
Plan your tax-free ISA savings. The ISA allowance is £20,000 for 2025/26 (6 April 2024 - 5 April 2025).
2025/26 ISA Allowance: £20,000
Split across Cash ISA, Stocks & Shares ISA, Innovative Finance ISA, and Lifetime ISA (max £4,000 for LISA).
Savings Goal Calculator
Find out how much you need to save monthly to reach your target.
Compare Savings Accounts
Compare different savings options to find the best return for your situation.
Emergency Fund Calculator
Calculate how much you need in your emergency fund and how long to build it.
How Compound Interest Works
The Power of Compound Interest
Compound interest is when you earn interest on both your original savings AND the interest you've already earned. This creates exponential growth over time - your money makes money, which then makes more money!
Example: £10,000 at 5% Annual Interest
| Year | Simple Interest | Compound Interest | Extra from Compounding |
|---|---|---|---|
| 1 | £10,500 | £10,500 | £0 |
| 5 | £12,500 | £12,763 | £263 |
| 10 | £15,000 | £16,289 | £1,289 |
| 20 | £20,000 | £26,533 | £6,533 |
| 30 | £25,000 | £43,219 | £18,219 |
The Rule of 72
To estimate how long it takes to double your money, divide 72 by the interest rate. At 4% interest, your money doubles in approximately 18 years (72 ÷ 4 = 18). At 6%, it doubles in 12 years.
Compounding Frequency Matters
£10,000 at 5% for 10 years with different compounding frequencies:
| Compounding | Final Balance | Interest Earned |
|---|---|---|
| Annually (once/year) | £16,289 | £6,289 |
| Quarterly (4x/year) | £16,436 | £6,436 |
| Monthly (12x/year) | £16,470 | £6,470 |
| Daily (365x/year) | £16,487 | £6,487 |
Daily compounding earns £198 more than annual compounding over 10 years!
UK ISA Guide 2025/26
ISA Allowance 2025/26: £20,000 Tax-Free
Tax year runs 6 April 2024 to 5 April 2025. Unused allowance does NOT roll over - use it or lose it!
Types of ISA
Cash ISA
Best for: Emergency funds, short-term savings (1-5 years), risk-averse savers.
Current rates: Easy access 4.25-4.75% AER | Fixed rate 4.5-5.17% AER
Protection: FSCS protected up to £85,000 per person per bank
Tax: ALL interest is 100% tax-free - no income tax or capital gains tax ever!
Stocks & Shares ISA
Best for: Long-term goals (5+ years), higher growth potential, can accept volatility.
Historical returns: 7-10% average annual return (not guaranteed, value can fall)
Protection: FSCS protects investments up to £85,000 if provider fails
Tax: No capital gains tax or dividend tax on investments inside ISA
Lifetime ISA (LISA)
Best for: First-time home buyers OR retirement savings (age 18-39 to open)
Bonus: 25% government bonus on contributions - up to £1,000 FREE per year!
Maximum contribution: £4,000/year (counts towards £20,000 total ISA allowance)
Withdrawal rules: Penalty-free for first home (max £450,000) or after age 60. Early withdrawal for other reasons = 25% penalty (lose bonus + some original capital)
Innovative Finance ISA (IFISA)
Best for: Higher risk tolerance, seeking higher returns than Cash ISA
How it works: Peer-to-peer lending - you lend money to borrowers, earn interest
Rates: 5-8% typical returns (higher risk than savings accounts)
Protection: NOT covered by FSCS - capital at risk if borrowers default
ISA Rules Summary
| Rule | Details |
|---|---|
| Annual limit | £20,000 across ALL ISA types combined |
| LISA limit | Max £4,000 (included in £20,000 total) |
| One ISA per type | Can open ONE Cash ISA, ONE S&S ISA per tax year |
| Transfers | Can transfer old ISAs between providers (doesn't use new allowance) |
| Age requirement | 18+ for most ISAs, 18-39 to open LISA |
| Tax year | 6 April - 5 April (unused allowance lost) |
Smart UK Savings Strategies 2025/26
1. Maximize Your £20,000 ISA Allowance
Why: Higher rate taxpayers save £360-£900/year in tax by using ISAs instead of taxable accounts. Even basic rate taxpayers benefit once they exceed £1,000 Personal Savings Allowance. Action: Transfer up to £20,000 into Cash ISA before April 5th deadline. Even if you only have £5,000, put it in ISA now - you can't go back and use last year's allowance.
2. Use Regular Saver Accounts (6-8% Rates!)
Why: Regular saver accounts offer 6-8% fixed rates for 12 months - far higher than easy access. Best options: First Direct Regular Saver (7%, £300/month max), Nationwide FlexDirect (8%, £200/month max), NatWest Digital Regular Saver (7%, £150/month). Action: Set up standing order immediately after opening to avoid missing monthly payments (loses high rate!).
3. Split Savings: Emergency Fund + Growth Fund
Why: Keeping ALL savings in easy access wastes 0.5-1% extra interest available in fixed bonds. Smart split: Emergency fund (3-6 months expenses) in easy access @ 4-5% + surplus savings in fixed rate bonds @ 4.7-5.25%. Example: £30K savings, £2K/month expenses = £12K emergency fund (easy access) + £18K growth fund (3-year fixed).
4. Claim 25% FREE with Lifetime ISA
Why: Government adds 25% to your contributions - that's £1,000 FREE for every £4,000 you save. Who qualifies: Age 18-39, first-time home buyer (house under £450,000) OR retirement savings. Warning: Early withdrawal for other reasons = 25% penalty (lose more than just the bonus). Only use LISA if certain you'll buy first home or keep until age 60.
5. Switch Accounts Every Year (Avoid Loyalty Penalty)
Why: Banks slash rates on existing accounts from 4-5% to 0.01% after intro period - but advertise 4-5% to NEW customers. Cost of loyalty: £50,000 at 0.01% vs 4.5% = £2,245/year lost! Action: Check MoneySavingExpert.com/savings annually (or use Savings Champion rate alerts for £20/year). Switch takes 30 minutes, saves £100-£2,000+.
6. Consider Stocks & Shares ISA for Long-Term Goals
Why: Over 5+ year periods, stocks historically return 7-10% vs 4-5% for cash savings. When to use: Goals 5+ years away (house deposit, children's education, retirement). Risk: Value CAN fall - don't invest money you need within 5 years. Start simple: Low-cost global index fund (Vanguard LifeStrategy, HSBC All-World Index) diversifies across thousands of companies.
Common UK Savings Mistakes to Avoid
Not Using Your £20,000 ISA Allowance
Higher rate taxpayers waste £360-£900/year in unnecessary tax by keeping savings in taxable accounts. Even £10,000 in a Cash ISA at 4.5% saves £180/year tax for 40% taxpayers. The allowance doesn't roll over - use it by April 5th or lose it forever.
Suffering the "Loyalty Penalty"
Banks slash rates on existing accounts (from 4-5% to 0.01%) while advertising high rates to new customers. On £50,000 savings, staying at 0.01% instead of switching to 4.5% costs £2,245/year! Set calendar reminder to check rates every 12 months.
Withdrawing Early from Lifetime ISA
The 25% penalty on early LISA withdrawal isn't just losing the bonus - it's 25% of the ENTIRE balance including interest. £20,000 saved becomes £21,150 after penalty (less than you put in!). Only use LISA if 99% certain you'll buy first home or keep until age 60.
Keeping EVERYTHING in Easy Access
If you have more than 6 months' expenses saved, the surplus doesn't need to be instantly accessible. Moving excess from 4.5% easy access to 5% fixed rate bonds earns an extra £50/year per £10,000. That's free money for money you weren't going to touch anyway.
Missing Regular Saver Payments
Regular saver accounts (6-8% rates) require monthly deposits. Miss ONE payment and you lose the high rate permanently - it drops to the standard 0.5-1%. Set up standing order IMMEDIATELY when you open the account. Never rely on manual monthly transfers.
Ignoring Inflation
If your savings rate (3%) is below inflation (4%), your money is LOSING purchasing power even though the balance grows. £10,000 at 3% becomes £10,300, but you'd need £10,400 to buy the same things. Aim for rates AT LEAST matching inflation.
Exceeding Personal Savings Allowance Unknowingly
Basic rate taxpayers: £1,000 tax-free interest. Higher rate: £500. Additional rate: £0. Exceed this in taxable accounts and you'll get a tax bill (20-45% of excess). £50,000 at 5% = £2,500 interest. Higher rate taxpayer pays £800 tax on £2,000 over allowance. Use ISAs to avoid.
Frequently Asked Questions
Compound interest is earning interest on both your original savings AND the interest you've already earned. For example, £5,000 at 4% grows to £5,200 after year 1, then £5,408 after year 2 (you earned £8 extra because interest compounds on the £200 from year 1).
UK banks compound interest at different frequencies - daily (best for savers), monthly, quarterly, or annually. AER (Annual Equivalent Rate) accounts for compounding frequency, making it easy to compare accounts. A 4% AER means you'll earn 4% over a year regardless of how often interest is added.
ISA allowance: £20,000 per tax year (6 April 2024 - 5 April 2025). All interest, dividends, and capital gains inside ISAs are 100% tax-free forever. This is your primary tax-free savings vehicle.
Personal Savings Allowance (PSA): For non-ISA accounts: Basic rate taxpayers: £1,000 tax-free interest. Higher rate taxpayers: £500. Additional rate taxpayers: £0. Interest above your PSA is taxed at your income tax rate.
Strategy: Always maximize ISA contributions first. Even if Cash ISA rate is slightly lower than a taxable account, higher rate taxpayers are often better off in the ISA after tax.
The 50/30/20 rule: Aim to save 20% of your take-home pay. 50% goes to essentials (rent, bills, food), 30% to lifestyle (entertainment, eating out), 20% to savings and debt repayment.
UK salary examples: £25,000 salary (£1,780/month take-home) = save £356/month. £35,000 salary (£2,300/month take-home) = save £460/month. £50,000 salary (£3,100/month take-home) = save £620/month.
Starting small: If 20% feels impossible, start with 5-10% and increase by 1% each month. Automate transfers to savings account on payday (pay yourself first). Even £100/month adds up to £13,200 over 10 years (at 4% interest).
Cash ISA is better when: You need the money within 5 years. You're building an emergency fund. You can't tolerate seeing your balance go down. You're saving for a specific near-term goal (holiday, car, wedding). Current rates: 4-5% AER.
Stocks & Shares ISA is better when: Your goal is 5+ years away. You want higher growth potential. You can ride out market volatility. You're saving for retirement, house deposit (if buying in 5+ years), or children's education. Historical average return: 7-10% (but value CAN fall).
Both: You can split your £20,000 allowance between Cash and S&S ISA. Example: Emergency fund in Cash ISA, long-term wealth building in S&S ISA.
Without interest: £200/month = 50 months (4 years 2 months). £300/month = 34 months (2 years 10 months). £500/month = 20 months (1 year 8 months).
With 4.5% interest (compound monthly): £200/month = 46 months (3 years 10 months). £300/month = 31 months (2 years 7 months). £500/month = 19 months (1 year 7 months).
Starting with £2,000 lump sum + £200/month at 4.5%: Reaches £10,000 in 37 months (3 years 1 month) - 9 months faster than starting from zero!
Easy Access (January 2026): Chip: 4.75% AER (instant access). Plum: 4.71% AER. Trading 212: 4.70% AER.
Fixed Rate (1 year): Gatehouse Bank: 4.90% AER. SmartSave: 4.85% AER. Al Rayan Bank: 4.80% AER (Sharia-compliant).
Regular Savers: Nationwide FlexDirect: 8% AER (£200/month max). First Direct: 7% AER (£300/month max). NatWest: 7% AER (£150/month max).
Cash ISA: Chip Cash ISA: 4.75% AER. Plum Cash ISA: 4.71% AER. Paragon Fixed Cash ISA: 4.85% (1 year fixed).
Rates change frequently - check MoneySavingExpert.com/savings for latest best buys.
Minimum: 3 months' essential expenses. Covers job loss, car breakdown, boiler repair. Essential expenses = rent/mortgage + utilities + food + transport + minimum debt payments.
Recommended: 6 months' essential expenses. Provides buffer if job search takes longer, or multiple emergencies happen. This is the "gold standard" most financial experts recommend.
Very secure: 9-12 months' expenses. Consider if: self-employed (income less predictable), single income household, work in volatile industry, have dependents.
Example: £2,000/month essential expenses = £6,000 minimum emergency fund, £12,000 recommended. Keep in easy access account (Chip, Plum, Trading 212) at 4.7-4.75% AER.
The Financial Services Compensation Scheme (FSCS) protects UK savings up to £85,000 per person per authorized institution. If your bank fails, FSCS pays out within 7 working days.
Important: Some brands share banking licenses. Example: Halifax, Bank of Scotland, and Lloyds = same license = combined £85,000 limit, NOT £85K each! Check FSCS.org.uk/protected to see which brands share licenses.
Strategy: If you have £100,000+, spread across banks with DIFFERENT licenses. Joint accounts get £170,000 protection (£85K each). NS&I (government-backed) has 100% protection with no limit.