Compound Interest Calculator
See how a lump sum and regular monthly contributions grow over time, with interest compounding monthly, quarterly or annually.
- Free, no sign-up
- Runs in your browser, nothing is stored
- Formula and worked example included
Compound Interest Calculator
Enter your figures to see results.
What is compound interest, in plain terms?
Compound interest is interest earned on interest. Leave £20,000 in an account paying 4.5% and the second year's interest is calculated on £20,900, not £20,000. Over five or ten years that snowball is most of the growth. It works exactly the same way against you on an overdraft or loan.
How to use this calculator
- Enter the lump sum you are starting with, or 0 if you are saving from scratch.
- Enter the gross annual rate quoted by the provider and how often it pays interest.
- Add a monthly contribution if you will top the account up, and choose the number of years to see the final balance and how much of it is interest.
What your result means
How to read the figure, what counts as normal, and what to do about it.
How compounding works
Simple interest pays you on the original sum only. Compound interest pays you on the original sum and on the interest already earned, so the balance grows a little faster every period. Over a few years the difference is small; over ten or twenty it is the majority of the growth.
The same maths runs in reverse for debt. A business overdraft or credit card compounding monthly at 20% APR costs far more than 20% of the balance each year once interest is charged on interest.
Where this matters for a business
- Surplus cash. Money sitting in a current account earning nothing is losing value to inflation. A business savings or notice account compounding monthly at 4% turns £50,000 into roughly £60,800 in five years.
- Reinvesting profit. Treat the rate as your expected return on capital to see what retaining profit rather than drawing it could be worth.
- Sinking funds. Saving monthly for a known future cost (a tax bill, a vehicle replacement, a lease renewal) shows how much less you need to set aside when interest does part of the work.
- Debt comparison. Run the balance of a loan at its APR to see the true cost of carrying it rather than paying it down.
Worked example: building a tax reserve
A consultancy moves £20,000 into a business savings account paying 4.5% gross, compounded monthly, and adds £500 a month for 5 years.
Paid in over the period: £20,000 + 60 × £500 = £50,000.
Balance after five years: about £58,600, of which roughly £8,600 is interest. The AER is 4.59%. At this rate the money doubles in about 15.4 years.
Frequently asked questions
What is the difference between gross rate and AER?
The gross rate is the nominal annual rate before compounding. AER includes the effect of compounding within the year, so it is slightly higher for anything compounding more than once a year. AER is the fair way to compare accounts.
Is daily compounding much better than monthly?
Barely. On 4.5% gross, monthly compounding gives an AER of 4.594% and daily gives 4.602%. The rate itself matters far more than the frequency.
How long does it take money to double?
A quick estimate is the Rule of 72: divide 72 by the interest rate. At 6% money doubles in about 12 years; at 4% about 18 years. The calculator shows the exact figure for your inputs.
Is interest on business savings protected?
Deposits with UK-authorised banks are covered by the FSCS up to £85,000 per business per banking group. If you hold more, spread it across institutions.
The maths behind this calculator
For anyone who wants to check the working or rebuild it in a spreadsheet.
The formula
Lump sum: A = P × (1 + r ÷ n) ^ (n × t)
Regular payments: A = C × ((1 + r ÷ n) ^ (n × t) − 1) ÷ (r ÷ n)
Where P = starting amount r = annual rate (as a decimal)
n = compounding periods per year t = years
C = contribution per compounding period
AER = (1 + r ÷ n) ^ n − 1 The Annual Equivalent Rate is the rate you would need with once-a-year compounding to end up with the same money. UK providers must quote it, which is why an account paying 4.5% gross monthly shows an AER of 4.59%. Always compare accounts on AER.
Assumptions and limits
- The interest rate is assumed constant for the whole term. Variable-rate accounts will differ.
- Contributions are made at the end of each period and earn interest from the next period. Monthly contributions are converted to the compounding frequency you choose so the total paid in is unchanged.
- Interest on business savings is taxable as trading income (companies) or savings income (sole traders). The calculator shows gross figures.
- Inflation is not included; deduct expected inflation from the rate to see growth in real terms.
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