Savings Interest Calculator

Enter your savings amount, the annual interest rate offered by your bank, and the number of years you plan to save. Click Calculate to see both compound interest (interest on interest) and simple interest totals, plus the difference between them.

Compound interest means you earn interest on your original savings plus any interest already earned. For example, £10,000 at 4.5% earns £450 in year one, then in year two you earn interest on £10,450 — giving you £470.25. Over time, compounding significantly boosts your returns.

For 2025/26, basic-rate taxpayers can earn up to £1,000 in savings interest tax-free. Higher-rate taxpayers get a £500 allowance. Additional-rate taxpayers get no allowance. Interest within your PSA is completely tax-free — you don't need to do anything to claim it.

You only pay tax on savings interest that exceeds your Personal Savings Allowance (£1,000 for basic rate, £500 for higher rate). ISA interest is always tax-free regardless of the amount. Your bank reports your interest to HMRC, who adjust your tax code if needed.

As of 2025/26, competitive easy-access rates are around 4-5% AER, while fixed-rate bonds may offer slightly higher. Always compare rates using the AER (Annual Equivalent Rate) which accounts for compounding frequency, making comparison between accounts fair.

AER (Annual Equivalent Rate) shows what you'd earn over a full year including compounding. Gross rate is the basic rate before compounding. If interest is paid monthly, the AER will be slightly higher than the gross rate because each month's interest earns interest in subsequent months.

Fixed-rate accounts typically offer higher interest rates but lock your money away for a set period (1-5 years). Easy-access accounts let you withdraw anytime but rates may change. Consider using both — easy-access for emergency funds and fixed-rate for money you won't need soon.

Most UK banks calculate interest daily but pay it monthly or annually. Daily calculation means you earn interest on your exact balance each day. This calculator uses annual compounding for simplicity — actual returns may vary slightly based on your bank's compounding frequency.