Compound Interest Calculator
TrendingSee how your savings or investments grow over time with compounding.
How it works
Compound interest is interest calculated on both your original balance and on interest already earned — as opposed to simple interest, which is only ever calculated on the original amount. Because each period's interest gets added to the balance before the next period's interest is calculated, growth accelerates over time: the effect is small in the early years and much larger over long time horizons, which is why starting to save early has such a disproportionate impact.
The compounding frequency matters too — interest that compounds monthly grows slightly faster than the same annual rate compounding only once a year, because interest starts earning its own interest sooner.
UK context
In the UK, tax-efficient savings and investment wrappers like ISAs let compound growth happen without Income Tax or Capital Gains Tax on the returns, up to an annual contribution allowance set by the government — this can make a meaningful difference to long-term growth compared with a taxable account.
Tips
- Regular contributions on top of an initial lump sum can dramatically increase the end balance compared with a one-off deposit left to compound alone — try comparing both in the calculator.
- Even a modest difference in interest rate compounds into a large difference over 20–30 years, so it's worth shopping around for savings rates rather than assuming they're all similar.
- Inflation reduces the real (spending-power) value of returns — a nominal growth rate that beats inflation is what actually grows your wealth in real terms.
Frequently asked questions
What's the difference between simple and compound interest?
Simple interest is calculated only on the original amount deposited, so growth is linear. Compound interest is calculated on the original amount plus any interest already earned, so growth accelerates over time — the longer the time horizon, the bigger the difference between the two.
Does compounding frequency actually make a noticeable difference?
For the same annual rate, more frequent compounding (monthly vs annually, for example) does increase the end balance, but the difference is usually modest compared with the effect of the interest rate itself or the length of time invested.
How much does starting early actually matter?
Significantly — because compounding accelerates over time, money invested a decade earlier has far longer to benefit from compounding, often outweighing a much larger contribution made later. This is one of the most consistent findings in long-term saving.
Are ISA returns really tax-free?
Growth and income within an ISA are generally free of Income Tax and Capital Gains Tax, within the annual ISA allowance set by the government each tax year — always check the current allowance and rules on gov.uk or MoneyHelper.
A quick note
Figures and thresholds referenced above (tax bands, VAT rates, redundancy caps and similar) are set by the government and reviewed periodically — this page explains how the calculation works, not necessarily today's exact numbers. Always check the official sources below before making a financial decision, and see our full disclaimer.