Compound Interest Calculator UK
Tax on a normal savings account is worked out year by year: interest above your Personal Savings Allowance (£1,000 basic rate, £500 higher rate, £0 additional rate) is taxed at your marginal rate and taken off the balance. ISA interest is never taxed and does not use up your allowance. Figures are estimates, not financial advice.
The formula
Compound interest means you earn interest on your interest. The formula is A = P(1 + r/n)nt + PMT × [((1 + r/n)nt − 1) / (r/n)], where P is your starting amount, PMT is your monthly contribution, r is the annual rate, n is how often interest compounds each year, and t is the number of years. The calculator above runs the same maths month by month, and takes tax off year by year for normal savings accounts.
Cash ISA vs normal savings account
| Cash ISA | Normal savings account | |
|---|---|---|
| Tax on interest | None — ever | Above your Personal Savings Allowance |
| Personal Savings Allowance used? | No | Yes |
| 2026/27 allowance | £20,000 a year across all ISAs | No deposit limit |
| Best for | Shielding interest from tax | Money above the ISA allowance, or short-term saving |
From 6 April 2027, tax on savings interest above your allowances rises to 24% (basic), 44% (higher) and 49% (additional). Interest inside an ISA stays completely tax-free.
Worked examples (£10,000 at 5%, annual compounding)
| After | Balance | Interest earned |
|---|---|---|
| 10 years | £16,288.95 | £6,288.95 |
| 20 years | £26,532.98 | £16,532.98 |
| 30 years | £43,219.42 | £33,219.42 |
Related: Take Home Pay Calculator · Income Tax Calculator 2026/27
Sources: GOV.UK “Individual Savings Accounts (ISAs)” and “Tax on savings interest” (Personal Savings Allowance £1,000 / £500 / £0); HMRC Overview of Tax Legislation and Rates (savings rates from 6 April 2027). Checked 13 November 2026.