Compound Interest Calculator

See how your money grows over time with the power of compound interest and regular contributions.

Learn how this calculator works

Calculator inputs

Starting amount

Regular contribution

Contribution frequency

Estimated annual return

Time period (years)

What happens to my data?

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Final balance

£300,851

Total invested

£130,000

Interest earned

£170,851

Interest share

56.8%

Invested £130,000Interest £170,851

Invested Interest

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Growth over time

Total invested Interest earned

Year-by-year breakdown

Year	Starting	Contributions	Interest	End balance
1	£10,000	£6,000	£919	£16,919
2	£16,919	£6,000	£1,419	£24,339
3	£24,339	£6,000	£1,956	£32,294
4	£32,294	£6,000	£2,531	£40,825
5	£40,825	£6,000	£3,148	£49,973
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6	£49,973	£6,000	£3,809	£59,782
7	£59,782	£6,000	£4,518	£70,299
8	£70,299	£6,000	£5,278	£81,578
9	£81,578	£6,000	£6,094	£93,671
10	£93,671	£6,000	£6,968	£106,639
11	£106,639	£6,000	£7,905	£120,544
12	£120,544	£6,000	£8,910	£135,455
13	£135,455	£6,000	£9,988	£151,443
14	£151,443	£6,000	£11,144	£168,587
15	£168,587	£6,000	£12,383	£186,971
16	£186,971	£6,000	£13,712	£206,683
17	£206,683	£6,000	£15,137	£227,820
18	£227,820	£6,000	£16,665	£250,486
19	£250,486	£6,000	£18,304	£274,790
20	£274,790	£6,000	£20,061	£300,851

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What is compound interest?

Compound interest is interest earned on both your original investment AND on the interest that has already been added. Your returns start generating their own returns, which is why growth accelerates over time rather than running in a straight line.

The contrast is simple interest, where you only earn interest on the original principal. £10,000 at 7% simple interest earns £700 every year. £10,000 at 7% compounded annually earns £700 in year one, £749 in year two (7% of £10,700), £802 in year three, and so on. After 30 years, simple interest gives you £21,000. Compound interest gives you £76,123. The difference is the entire point.

How time amplifies compounding

The two variables that drive the maths are rate and time. Of the two, time does more of the work. The classic illustration: £1,000 invested at 7% real return for 40 years grows to about £15,000. The same £1,000 invested for 20 years grows to about £3,870. Halving the time horizon doesn't halve the result, it quarters it. This is why every personal finance guide tells you to start as early as possible: time is the cheapest input you have, but only if you use it.

Years invested	£1,000 at 5%	£1,000 at 7%	£1,000 at 10%
10	£1,629	£1,967	£2,594
20	£2,653	£3,870	£6,727
30	£4,322	£7,612	£17,449
40	£7,040	£14,974	£45,259

The 10% column shows what a US-equity-heavy portfolio has historically delivered; the 7% column matches a global tracker. For UK-resident investors planning around inflation-adjusted (real) returns, 5% is the prudent base case.

Real vs nominal returns (and which to use)

A nominal return is the headline figure before inflation. A real return is what's left after inflation eats its share. Both are useful, but they answer different questions.

Use nominal returns (7-8% for equities, 4-5% for cash) when you want the literal pound figure you'll see on your statement in 30 years' time. Useful for planning specific future expenses denominated in future pounds.
Use real returns (5% for equities, around 0-1% for cash) when you want today's purchasing power. This is what matters for retirement planning, because the only thing that matters is what your portfolio can buy when you spend it, not what the headline number looks like.

Most readers should plan in real terms. The calculator above lets you set whichever rate you prefer. Just be consistent: don't mix nominal income with real returns or vice versa, or the maths becomes meaningless.

How UK tax wrappers amplify compounding

Compound growth inside a taxable account (GIA) faces dividend tax (8.75% to 39.35%) and capital gains tax (18% or 24%) on every disposal. Inside an ISA or SIPP, all of it is tax-free. Over 30 years of compounding, this gap matters more than it looks.

A £10,000 investment at 7% nominal for 30 years compounds to £76,123 inside an ISA. Inside a GIA paying basic-rate dividend tax annually, the effective compounding rate drops to roughly 6.7%, giving you about £71,000 - a £5,000 gap from one tax wrapper choice. For higher-rate taxpayers the gap is closer to £15,000. This is why the standard advice is to max your Stocks and Shares ISA allowance before holding investments in a GIA.

Frequently asked questions

How is compound interest calculated?

Future value = Principal x (1 + r/n)^(n x t), where r is the annual rate, n is the number of compounding periods per year, and t is the number of years. Most platforms compound monthly or daily; the difference between daily and monthly compounding on the same headline rate is small (around 0.05% per year on a 7% rate).

What return rate should I assume for UK investments?

For a globally diversified equity portfolio (e.g. Vanguard FTSE Global All Cap), historic long-run nominal returns are around 7-8% per year. In real terms (after inflation), that drops to roughly 5%. For cash savings, current rates are 4-5% nominal but typically 0-1% real once inflation is netted off.

How much does starting early actually matter?

More than people realise. £200/month invested from age 25 at 7% real return compounds to about £528,000 by age 65. The same £200/month started at 35 compounds to only £244,000. Starting ten years later more than halves the result. Time, not contribution amount, does most of the work.

Should I use this calculator for cash savings or investments?

Both work. For cash, use the headline AER as the rate and pick monthly compounding. For investments, use a real return (5-7%) and pick yearly compounding - investments don't literally compound at a fixed daily rate, so a single annual figure is the cleanest approximation. Cash returns are predictable; investment returns vary year to year, so any single-rate projection is a rough indicator rather than a forecast.

Does the calculator account for tax?

No, the calculator gives you the gross compounded figure. To approximate after-tax returns inside a GIA, reduce your rate by 1 to 2 percentage points to account for dividend tax and gains-tax drag. Inside an ISA or SIPP, growth is tax-free, so the calculator output is what you actually get.

Why does the difference between 7% and 10% explode at 40 years?

Compound growth scales exponentially with the rate, not linearly. The gap between 7% and 10% compounds on itself every year, so what starts as a 3 percentage point difference becomes a 3x difference in end value over four decades. This is why a few tenths of a percent in platform fees matter so much over a working lifetime - they compound on the wrong side of the equation.