How Much Interest Will I Earn Calculator​

If you're saving money in the UK, you probably want to know how much interest you'll earn. This guide explains how interest calculators work and how to use them to plan your savings.

UK Savings Interest Calculator

Enter 0 if you won't make regular deposits

Use the AER (Annual Equivalent Rate)

Your Results

Total Deposits: £

Interest Earned (before tax): £

Tax Deducted: £

Final Balance: £

UK Personal Savings Allowance (2023):

  • Basic rate taxpayers: £1,000 tax-free interest
  • Higher rate: £500 tax-free
  • Additional rate: £0 tax-free

What is an Interest Calculator?

An interest calculator is a tool that helps you work out how much money your savings will earn over time. You put in:

  • How much you're saving (your deposit)
  • The interest rate
  • How long you'll save for

The calculator then shows how your money will grow.

Tip: Look for calculators that show both simple and compound interest - they give different results!
How Much Interest Will I Earn Calculator​

Types of Interest Calculators

1. Simple Interest Calculator

Simple interest pays you only on your original amount. The formula is:

Interest = Principal × Rate × Time

Example: £1,000 at 3% for 2 years

£1,000 × 0.03 × 2 = £60 interest

Total after 2 years: £1,060

2. Compound Interest Calculator

Compound interest pays you on your original amount plus any interest you've already earned. Most UK savings accounts use this method.

Example: £1,000 at 3% for 2 years (compounded yearly)

Year 1: £1,000 × 1.03 = £1,030

Year 2: £1,030 × 1.03 = £1,060.90

Total interest: £60.90 (more than simple interest!)

Tip: The more often interest is compounded (daily, monthly, yearly), the more you'll earn. Check how often your account compounds.

How to Use an Interest Calculator

Follow these simple steps:

  1. Enter your initial deposit - How much you're putting in first
  2. Add regular contributions (if any) - Like monthly savings
  3. Input the interest rate - Make sure it's the AER (Annual Equivalent Rate)
  4. Choose the time period - How long you'll save for
  5. Select compounding frequency - Usually yearly for UK accounts

Where to Find Good Calculators

These UK websites have reliable calculators:

Factors That Affect Your Interest

1. Interest Rate Changes

UK interest rates change over time. The Bank of England base rate affects savings rates.

2. Tax on Savings

Most UK residents get a Personal Savings Allowance:

  • Basic rate taxpayers: £1,000 tax-free
  • Higher rate: £500
  • Additional rate: £0

3. Account Type

Different accounts pay different rates:

  • Easy-access savings: Lower rates, take money anytime
  • Fixed-rate bonds: Higher rates, lock money away
  • Cash ISAs: Tax-free interest
Tip: Always check for withdrawal restrictions - some accounts charge you for taking money out early.

Advanced Calculator Features

Some calculators offer extra options:

1. Inflation Adjustment

Shows your savings' real value after inflation. UK inflation averages about 2%.

2. Tax Calculation

Works out how much tax you'll pay on your interest.

3. Interest Projection Graphs

Visual charts showing how your money grows over time.

Common Calculator Mistakes

Avoid these errors:

  1. Using gross rate instead of AER - Always use AER for comparisons
  2. Forgetting regular deposits - Monthly savings boost your total
  3. Ignoring compounding frequency - Daily compounding earns more than yearly
  4. Overlooking bonus rates - Some accounts offer high rates for a short time only

Calculator Example Walkthrough

Let's calculate interest for £5,000 at 2.5% AER for 3 years with yearly compounding:

  1. Year 1: £5,000 × 1.025 = £5,125
  2. Year 2: £5,125 × 1.025 = £5,253.13
  3. Year 3: £5,253.13 × 1.025 = £5,384.46

Total interest earned: £384.46

Tip: Adding £100 monthly would increase the final total to about £8,860.15 with the same rate!

Interest Rates in the UK (2023)

Current average rates (these change often - check for updates):

Account Type Typical Rate
Easy-access savings 1.5% - 3%
1-year fixed bond 3% - 4.5%
Cash ISA 2% - 3.5%
Notice accounts 2% - 3.8%

Source: MoneySuperMarket savings comparisons

Making the Most of Your Savings

Follow these UK-specific tips:

1. Use Your ISA Allowance

You can save £20,000 per year in ISAs tax-free.

2. Consider Premium Bonds

Instead of interest, you win tax-free prizes. Average return is about 1-1.4%.

3. Split Large Savings

Put money in different accounts to stay under the £85,000 FSCS protection limit per bank.

4. Watch for Rate Drops

Banks often reduce rates after introductory periods - set calendar reminders.

Tip: Use multiple calculators to compare results - this helps spot any errors in your calculations.

Frequently Asked Questions

Q: Is the interest paid monthly or yearly?

A: It depends on the account. Some pay monthly, others yearly. The AER shows the equivalent yearly rate regardless.

Q: Why do different calculators give different results?

A: They may use different compounding assumptions or rounding methods. Stick to one good calculator for consistency.

Q: How accurate are these calculators?

A: They're accurate for fixed rates. For variable-rate accounts, they're estimates only.

Q: Do I pay tax on savings interest?

A: Possibly - it depends on your Personal Savings Allowance and total income. See GOV.UK savings tax rules.

Final Thoughts

Using an interest calculator helps you plan your savings and set realistic goals. Remember that rates change, so recalculate periodically. The key is to start saving early - thanks to compound interest, even small amounts grow significantly over time.

For the latest UK savings deals, check MoneySavingExpert or MoneySuperMarket regularly.

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