Compound Interest Calculator

How Compound Interest Grows Your Money Over Time

Compound interest is the engine behind every long-term UK savings goal — from a £20,000 Stocks & Shares ISA contribution this tax year to the £200/month a 25-year-old quietly drops into a workplace pension. This calculator models exactly that: how a starting balance plus regular contributions grow when interest, dividends or fund returns are reinvested at a chosen frequency. It is built around UK tax wrappers (Cash ISA, S&S ISA, Lifetime ISA, Junior ISA, SIPP and auto-enrolment workplace pensions), uses AER (Annual Equivalent Rate) for cash savings comparisons, and lets you stress-test realistic equity return ranges of 5–7% nominal rather than the headline rates marketing teams prefer.

In the 2025/26 tax year, the overall ISA allowance is £20,000, split however you like across Cash ISA, Stocks & Shares ISA, Innovative Finance ISA and Lifetime ISA — with the LISA capped at £4,000 of that £20,000 and reserved for the 18–39 age band. Junior ISAs sit outside the adult allowance with a separate £9,000-per-child limit. All three wrappers shield interest, dividends and capital gains from HMRC, which is what makes compounding inside them so powerful: you are not paying 20%, 40% or 45% income tax on each year's growth, so the next year's compounding works on a bigger base. Outside an ISA, the Personal Savings Allowance gives basic-rate taxpayers £1,000 of tax-free interest, higher-rate taxpayers £500, and additional-rate taxpayers nothing — a quiet ceiling that bites once a £40,000+ pot hits 4–5% AER.

Cash ISAs in 2025/26 sit roughly in line with the Bank of England base rate, which has hovered in the 4–5% range. A typical easy-access Cash ISA at 4.5% AER turns a £5,000 lump sum into about £7,765 over 10 years with no further deposits. A Stocks & Shares ISA invested in a global tracker fund at a long-term nominal return of 6% turns £200/month into roughly £138,000 over 25 years — an outcome a Cash ISA at 4.5% will never deliver, but at the cost of short-term volatility and no FSCS guarantee on the investments themselves. Use this calculator to model both honestly, side by side, before committing this year's allowance.

How to Calculate Compound Interest on Savings or Investments

Enter your initial deposit, the AER on offer, the compounding frequency and the number of years. Add a monthly contribution to model an ISA, LISA or workplace pension drip-feed. Click Calculate to see the projected balance, total contributions and total interest earned.

1. Enter your starting balance — for example, the amount currently sitting in your Cash ISA, S&S ISA or pension.
2. Set the rate. Use the AER for cash savings, or a realistic nominal return (typically 5–7% for diversified equities) for an S&S ISA, LISA invested in funds, or pension.
3. Choose the compounding frequency. Most UK Cash ISAs compound monthly or annually; investment funds effectively compound continuously through reinvested dividends.
4. Enter the time period in years — match this to your goal (e.g. 18 years for a Junior ISA, 35–40 years for a workplace pension).
5. Add a monthly contribution. £166.66/month uses your full £2,000 yearly LISA contribution; £1,666.66/month uses the full £20,000 ISA allowance.
6. Click Calculate to see the projected balance, total contributions, total interest/growth and a year-by-year breakdown.
7. Re-run with a lower rate (e.g. 4% instead of 7%) to stress-test the plan against weaker market returns or rising inflation.

The Compound Interest Formula (A = P(1 + r/n)^nt)

The formula used: A = P(1 + r/n)^(nt) where P = principal, r = annual rate, n = compounds per year, t = years

Compound Interest Examples: £1,000 Over 5, 10, and 20 Years

£10,000 in a Stocks & Shares ISA at 6% nominal compounded monthly for 10 years with £200/month contributions: projected balance ≈ £50,901. Total contributions = £34,000. Total compound growth ≈ £16,901. Equity returns are not guaranteed and past performance is not indicative of future results.

When Compound Interest Calculations Matter Most

Use this calculator any time you are choosing between leaving money in a current account and putting it inside a tax wrapper. The first run that matters for almost every UK saver is the workplace pension question: under auto-enrolment the minimum total contribution is 8% of qualifying earnings (£6,240–£50,270 in 2025/26), made up of 5% from you and 3% from your employer. Modelling that 8% on a £35,000 salary at 6% nominal for 40 years shows a pot well into six figures — and that is before stretching to higher contributions, salary sacrifice or a SIPP top-up.

It is equally useful for ISA allowance planning. The £20,000 limit resets every 6 April and does not roll over, so unused allowance is permanently lost. Run a scenario with £1,666.66/month (the full £20,000 spread evenly) at 5% versus 6% versus 7% to see how sensitive a 25-year horizon is to small changes in return — and to platform/fund fees, which effectively reduce your input rate by 0.2–1.0% a year. Junior ISAs are the same exercise on an 18-year clock, where small monthly amounts started at birth quietly outpace lump-sum top-ups in the teenage years.

The third high-value use case is the LISA. A 25-year-old saving £4,000 a year into a LISA earns the £1,000 government bonus on top — effectively a 25% instant return before any compounding has happened. Modelled at a modest 5% nominal across 35 years to age 60, that combination becomes one of the best risk-adjusted long-term wrappers in the UK system. Use the calculator to compare LISA vs S&S ISA outcomes for your specific timeline before committing this tax year's allowance.

Key Compound Interest Terms

Monthly vs Quarterly vs Annual Compounding Compared

How to Maximise Compound Growth on Your Savings

• Use the full £20,000 ISA allowance every tax year you can — it does not roll over, and an unused allowance is gone for good on 6 April.
• If you're 18–39, open a LISA before your 40th birthday so you keep the right to contribute £4,000/year and earn the 25% government bonus until age 50.
• Set up a standing order on the 1st of each month so contributions are automatic — drip-feeding £1,666.66/month uses the full £20k allowance evenly.
• Check if your employer offers pension matching above the 3% auto-enrolment minimum; an extra 2% match is effectively a 100% return on those contributions before any market growth.
• Use AER (not gross rate) when comparing Cash ISAs, and never confuse a 12-month bonus rate with the underlying revert rate.
• For S&S ISAs, choose 'Accumulation' (Acc) fund share classes so dividends auto-reinvest — that's the 'compound' in compound growth.
• Self-employed or above the £60,000 pension Annual Allowance? A SIPP gives you the same tax relief as a workplace pension with much wider investment choice.
• Watch the Personal Savings Allowance cliff edge — once your taxable interest exceeds £1,000 (basic rate) or £500 (higher rate), shift the next pound into an ISA or premium bonds.
• Stress-test long-term plans at 4–5% nominal, not 7%+, to keep expectations honest after fees and inflation.

Common Compound Interest Errors to Avoid

• Delaying pension contributions in your 20s: starting at 30 instead of 25 with £200/month at 6% nominal costs roughly £113,900 of compound growth by age 65 — far more than the £12,000 of contributions you 'saved'.
• Comparing Cash ISAs on gross rate instead of AER, and missing that a 4.40% rate paid monthly is materially better than a 4.45% paid annually.
• Forgetting the £20,000 ISA allowance is per person — a couple effectively has £40,000 of tax-free shelter every tax year.
• Counting LISA contributions outside the £20,000 ISA limit — the £4,000 LISA cap is part of the overall £20,000, not on top of it.
• Assuming past equity returns guarantee future results — global equities have averaged 5–7% nominal long-term, but with 30%+ peak-to-trough drawdowns along the way.
• Ignoring fund and platform fees: a 1% total cost on a 6% portfolio cuts the long-term outcome by roughly 25% over 40 years.
• Triggering the LISA's 25% withdrawal charge by accessing money before 60 for non-qualifying reasons — you lose the bonus and a slice of your own contributions.
• Confusing the compounding frequency (how often interest is added) with the contribution frequency (how often you deposit) — they are independent inputs.
• Failing to use carry-forward on pensions: unused Annual Allowance from the previous three tax years can be added to this year's £60,000.