Calculate simple and compound interest, compare final balances and see the effective annual rate.
This estimate assumes a fixed rate and no deposits, withdrawals, fees or tax. Actual savings and borrowing products may calculate interest differently.
How to use the Interest Calculator
Enter the starting amount, annual interest rate and time period. Select how frequently interest is compounded. The calculator shows the compound balance, compound interest earned or charged, a simple-interest comparison and the effective annual rate.
Simple and compound interest formulas
| Result | Formula |
|---|---|
| Simple interest | Principal × annual rate × years |
| Simple final balance | Principal + simple interest |
| Compound balance | Principal × (1 + rate ÷ periods)^(periods × years) |
| Compound interest | Compound balance − principal |
| Effective annual rate | (1 + rate ÷ periods)^periods − 1 |
How compound interest works
With simple interest, the calculation always uses the original principal. Compound interest adds each period’s interest to the balance, so later interest is calculated on a larger amount. MoneyHelper explains that compound interest means earning interest on both the original amount and interest already added. Read its interest rates guide.
Interest on savings and borrowing
For savings, a higher rate and more frequent compounding generally increase the ending balance. For borrowing, the same mechanism can increase the total cost when interest remains unpaid. Compare products using the rate definition, fees, access conditions and whether the advertised rate is fixed or variable.
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Plan repayments with the Debt Payoff Calculator. Estimate tax-efficient savings growth with the ISA Calculator UK. Check the effect of extra mortgage payments using the Mortgage Overpayment Calculator UK. Browse more tools on the United Kingdom Calculator homepage.
Frequently asked questions
What is the difference between simple and compound interest?
Simple interest uses only the original principal. Compound interest also applies to interest previously added to the balance.
Does compounding frequency affect the result?
Yes. At the same nominal rate, more frequent compounding generally produces a slightly higher final balance.
Can I enter a zero interest rate?
Yes. Both final balances will then equal the starting amount and the interest will be zero.
Does the calculator include tax or fees?
No. The results exclude tax, product fees, deposits, withdrawals and rate changes.
Is the annual rate the same as AER?
Not always. AER reflects compounding over a year, while a nominal annual rate may not. The calculator displays the effective annual rate implied by the selected frequency.