CalcBritain

Savings & ISA Calculator

Calculate compound interest on your savings and compare the tax you pay in a taxable account versus an ISA. Updated for the 2026/27 tax year.

Enter your savings details

Fill in your deposit, interest rate and term to see how your savings could grow over time.

How savings tax and ISA allowances work in 2026/27

Interest earned on UK savings is subject to income tax unless it falls within a tax-free allowance. Three layers of protection apply before tax is charged: any unused Personal Allowance (£12,570); the starting-rate-for-savings band (up to £5,000 at 0%, reduced by non-savings income above the PA); and the Personal Savings Allowance (£1,000 for basic-rate, £500 for higher-rate, £0 for additional-rate taxpayers). Only interest exceeding all three is taxed at your marginal rate.

An ISA completely sidesteps this, all interest, dividends and growth inside an ISA are permanently tax-free, and withdrawals do not affect your PSA, dividend allowance or capital gains allowance. The 2026/27 ISA subscription limit is £20,000 per tax year. The ISA vs taxable comparison tab shows exactly how much tax you save by keeping savings inside an ISA for your specific situation.

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What compounding actually does

Compound interest is interest earned on interest already earned. The effect is unremarkable early and disproportionate late, which is why it is so consistently underestimated.

Look at the shape rather than the total. In the worked example below, £1,000 plus £200 a month at 4.5% earns £96.06 of interest in year one and £1,339.52 in year ten. Same rate, same monthly contribution, fourteen times the interest, purely because the balance doing the earning is larger.

That is the entire argument for starting early rather than saving harder later. The first years feel pointless and are doing the work that makes the last years possible.

It also means time matters more than rate over long horizons. Chasing an extra half a percent is worth far less than starting two years sooner, though over short horizons the reverse is true and the rate is most of the story.

AER, gross, and what the number on the tin means

AER, the Annual Equivalent Rate, is the standardised figure that lets you compare accounts fairly. It shows what you would earn over a year with interest compounded, whatever the account's actual payment frequency, so it is the number to compare on.

Gross rate is the rate before any tax, paid without deduction since 2016. Accounts paying monthly rather than annually have a slightly lower gross rate for the same AER, because you get the money sooner and it compounds.

Compounding frequency matters less than people expect. At 4.5%, monthly compounding versus annual makes a small difference over ten years; the contribution amount and the term dominate. Do not choose an account on compounding frequency when the AER already accounts for it.

Watch for bonus rates. Many easy-access accounts pay a headline rate including a twelve-month introductory bonus and drop sharply afterwards. Diarise the expiry date when you open one, because the drop is not announced loudly.

Tax on savings interest

Interest outside a tax wrapper is taxable, but most people pay nothing because of the Personal Savings Allowance. Basic-rate taxpayers have a £1,000 allowance, higher-rate £500, and additional-rate taxpayers get none at all.

At today's rates that allowance goes further than it sounds and less far than it used to: a basic-rate taxpayer with £20,000 at 4.5% earns £900 of interest and stays inside it, while £25,000 does not. Rising rates have pulled far more savers into paying tax on interest than was the case a few years ago.

There is also the starting rate for savings, worth up to £5,000 of tax-free interest, but it tapers away as non-savings income rises above the personal allowance and so mainly helps people with low earned income and substantial savings.

Banks report interest to HMRC automatically, and tax owed is usually collected by adjusting your PAYE tax code rather than by a bill. If you complete a tax return, you declare it there instead.

Use the ISA allowance before optimising the rate

A cash ISA pays interest with no tax at all, no allowance to track and nothing to report. For anyone at risk of exceeding their Personal Savings Allowance, filling the ISA allowance is worth more than a small rate advantage on a taxable account.

Compare on the after-tax return rather than the headline. For a higher-rate taxpayer, a 4.5% taxable account returns 2.7% after 40% tax, so a 4% ISA beats it comfortably. For a basic-rate taxpayer still inside their allowance, the taxable account may genuinely win.

Lifetime ISAs add a 25% government bonus on up to £4,000 a year for a first home or retirement, which no ordinary savings rate can approach. The conditions are strict and the withdrawal charge for anything else can return less than you paid in, so read them before opening one.

Whatever the wrapper, stay within the FSCS protection limit per banking licence. Some brands share a licence, so two accounts at what look like different banks can be one protected pot.

What this projection does not model

The figures are nominal, meaning they are not adjusted for inflation. £31,806 in ten years buys less than £31,806 today, and if inflation runs above your interest rate the balance grows while its purchasing power shrinks. That is the real risk in holding cash long term, and it is invisible in a growth chart.

The projection also assumes the rate holds for the whole term, which no easy-access account guarantees. Fixed-term bonds do guarantee it, at the cost of access.

It assumes contributions continue uninterrupted with no withdrawals. Real saving has gaps, and a gap early costs more than a gap late for the same compounding reason that makes starting early valuable.

And it is a savings projection, not an investment one. Over ten years or more, historically, investing has tended to outpace cash, at the cost of volatility and the real possibility of being down when you need the money. Cash is the right answer for anything with a date attached; for longer horizons the comparison is worth making properly.

Worked example: £1,000 plus £200 a month for ten years

At 4.5% AER with interest compounded monthly and contributions at the end of each month. These are the exact figures this calculator returns.

Initial deposit£1,000.00
Monthly contribution£200.00
Annual rate (AER)4.5%
Term10 years
Total paid in£25,000.00
Interest earned£6,806.61
Final balance£31,806.61
Interest earned in year 1£96.06
Interest earned in year 10£1,339.52
Balance after 5 years£14,680.91

Year one earns £96.06 and year ten earns £1,339.52, fourteen times as much, with nothing changed but the size of the balance doing the earning. Note also that the halfway point by time is not the halfway point by money: after five of the ten years the balance is £14,680.91, well under half the final £31,806.61. Compounding does most of its work at the end, which is exactly why the early years feel so unrewarding.

Frequently asked questions

How is compound interest calculated on savings?
Interest is added to the balance, and future interest is then earned on that larger balance as well as on your contributions. With regular deposits, each one starts compounding from the date it lands, so earlier contributions do more work. On £1,000 plus £200 a month at 4.5% over ten years, you pay in £25,000 and finish with £31,806.61, of which £6,806.61 is interest.
What is AER and why does it matter?
The Annual Equivalent Rate is the standardised figure showing what you would earn over a year with interest compounded, regardless of how often the account actually pays. It exists so accounts can be compared like for like, and it is the number to compare on. The gross rate is the pre-tax rate before compounding, which is why a monthly-paying account shows a slightly lower gross rate than annual for the same AER.
Do I pay tax on savings interest?
Often not, because of the Personal Savings Allowance: £1,000 of interest tax-free for basic-rate taxpayers, £500 for higher-rate, and nothing for additional-rate. Above that, interest is taxed at your marginal rate. Banks report interest to HMRC automatically and tax is usually collected by adjusting your tax code rather than by a bill. Interest inside a cash ISA is outside all of this.
Is a cash ISA better than a regular savings account?
Compare after-tax returns, not headline rates. For a higher-rate taxpayer a 4.5% taxable account returns 2.7% after tax, so a 4% ISA wins comfortably. For a basic-rate taxpayer still inside the £1,000 Personal Savings Allowance, a higher-paying taxable account may genuinely be better. The ISA also removes any need to track the allowance or report anything.
How much difference does compounding frequency make?
Less than most people expect. At typical savings rates, monthly versus annual compounding changes a ten-year total by a modest amount, and the AER already accounts for the difference so accounts remain comparable. The contribution amount and the length of time dominate. Do not choose an account on compounding frequency; choose on AER, access terms and whether the headline rate includes a bonus that expires.
Does this account for inflation?
No. The figures are nominal, so £31,806 in ten years will buy less than £31,806 buys today. If inflation runs above your interest rate, the balance grows while its purchasing power falls, which is the real risk in holding cash over long periods and the one a growth chart never shows. For a real-terms view, compare your rate against the inflation rate over the same period.
Should I save or invest?
Money needed on a known date within a few years belongs in cash, because there is no time to recover from a fall. Over ten years or more, investing has historically tended to outpace cash, at the cost of volatility and the genuine possibility of being down when you need the money. This calculator projects savings only. Keep an accessible emergency fund in cash whatever else you do.
Why does the balance grow so slowly at first?
Because compounding works on the balance, and early on the balance is mostly just your own contributions. In the example above, year one earns £96.06 while year ten earns £1,339.52. After five of the ten years the balance is £14,680.91, well under half the final total. The early years feel unrewarding and are doing the work that makes the later ones possible, which is the whole case for starting sooner rather than saving harder later.

Also known as: savings calculator · savings calculator UK · compound interest calculator UK · regular saver calculator · savings account calculator UK · monthly savings calculator · compound growth calculator UK

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