Compound Interest Calculator: UK Monthly Savings and Growth, Year by Year
Most of what a compound interest calculator tells you is contained in one uncomfortable number: how much of the final balance you put there yourself. This one shows that number next to the total, because a projection that only reports the total flatters the interest and hides the saving.
Monthly contributions and why they dominate the early years
Over a short run the monthly amount does nearly all the work. At £200 a month for eight years at 5%, the balance lands around £23,500 and roughly £19,200 of that is money you paid in: the interest contributes about a fifth. Stretch the same monthly interest calculator inputs to twenty-five years and the proportions invert. That crossover, not the headline total, is what the year-by-year table is for.
The calculator applies interest monthly and adds each contribution at the end of the month, which is the convention most UK savings accounts follow. An account that credits interest annually will run slightly behind these figures; one that compounds daily will run slightly ahead. The gap is small enough that it does not change a decision, but it is the usual reason a monthly interest calculator and a bank statement disagree by a few pounds.
Using it for UK savings and ISA allowances
A compound interest calculator UK savers use has to stop somewhere, and the stopping point is usually the ISA allowance rather than the maths. Nothing here caps your contributions, so if you are modelling an ISA, check the annual figure against the allowance for the tax year yourself before treating the projection as a plan.
Rates are the other thing this tool cannot know. No live rates are published on this site, so the rate field is yours to fill from the account you actually hold or are considering. A projection built on last year's headline rate is a projection about last year, and that is the largest single source of error in any compound interest calculator UK savers rely on.
What this compound interest calculator shows about compound growth
Compound growth is unremarkable for about a decade and then stops being unremarkable. The reason is that interest earns interest only after there is enough of it to matter, so the curve is nearly straight at first. A compound growth calculator that only shows the endpoint gives you no way to see where the bend starts, which is why the table above lists every year rather than a single result.
Two things about a compound growth calculator tend to catch people out. The bend depends far more on the rate than on the balance, so doubling the monthly amount lifts the whole line without moving the bend. And nothing here is adjusted for inflation: the figures are nominal, and across twenty-five years nominal and real are two different arguments.
How to calculate compound interest without the calculator
For a single lump sum with no contributions, the arithmetic fits on one line: multiply the balance by one plus the rate, once per compounding period. £1,000 at 5% compounded annually for three years is 1000 × 1.05 × 1.05 × 1.05, or £1,157.63.
Regular contributions are where doing it by hand stops being reasonable, because each payment compounds for a different length of time. That is the whole reason to know how to calculate compound interest by hand and then not do it: the formula for a contribution stream is a geometric series, and getting one exponent wrong is invisible in the answer.
Knowing how to calculate compound interest for a single lump sum is still worth the two minutes, because it gives you a sanity check on any tool, including this one.
AER, gross and the rate you should actually enter
UK savings accounts quote two rates and they are not the same number. The gross rate is the simple annual rate before any compounding within the year. The AER: annual equivalent rate, is what the gross rate becomes once the account's own compounding is applied, so it is the figure that lets you compare an account paying monthly against one paying annually.
Enter the AER. This calculator compounds monthly, and feeding it a gross rate from an account that also compounds monthly applies the effect twice, which overstates the balance. The gap looks trivial on a one-year view and is not trivial over twenty: at nominal 5%, gross and AER differ by about a tenth of a percentage point, and a tenth of a point compounded for two decades is real money.
One exception worth knowing. If the account pays interest only once a year, gross and AER are the same figure, and monthly compounding here will run slightly ahead of what the account actually does. The difference is small enough to ignore for a decision and large enough that it is worth knowing why your statement disagrees.
Frequently asked questions
Does this compound interest calculator handle monthly or annual compounding?
Monthly. The annual rate you enter is divided by twelve and applied each month, and each contribution lands at the end of its month. If your account credits interest once a year, expect the real balance to come in a little under these numbers.
Is the interest figure before or after tax?
Before. Whether any of it is taxable depends on the wrapper and on your other income, which the calculator has no way to know. Inside an ISA the question does not arise; in a standard savings account the personal savings allowance usually does the work.
Why does the total differ from my bank's own projection?
Almost always the compounding frequency or the timing of the contribution. Some providers assume the payment arrives at the start of the month, which gives every contribution one extra month of interest and nudges the total up.
Can I model a rate that changes partway through?
Not in one pass. Run it to the year the rate changes, take the balance from the table, and use that as the starting balance in a second run at the new rate.
Does it account for inflation?
No. Every figure is nominal. Over a long run the difference matters: at 3% inflation, money doubles in purchasing-power terms far more slowly than the balance column suggests.