1. What is Compound Interest?

Compound interest is the interest calculated on the initial principal and also on the accumulated interest of previous periods. It's often called "interest on interest" and can significantly boost savings growth over time compared to simple interest.

2. How Does the Calculator Work?

The calculator uses the compound interest formula:

Where:

• \( FV \) — Future Value of the investment
• \( P \) — Principal investment amount
• \( r \) — Annual interest rate (decimal)
• \( n \) — Number of compounding periods per year
• \( t \) — Time the money is invested for in years

Explanation: The formula calculates how much your savings will grow based on the interest rate, compounding frequency, and time period.

3. Current Best Savings Rates in UK

As of September 2025: The best savings interest rates in the UK currently reach up to 4.84% for standard accounts, with some regular savings accounts offering up to 7.1%. Rates vary by provider, account type, and market conditions.

4. Using the Calculator

Tips: Enter your initial deposit amount, select the best available interest rate, choose how often interest compounds, and specify the investment period. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between simple and compound interest?
A: Simple interest is calculated only on the principal amount, while compound interest is calculated on both the principal and accumulated interest.

Q2: How often should interest compound for maximum growth?
A: The more frequently interest compounds, the faster your savings grow. Daily compounding provides the best returns, followed by monthly, quarterly, and annually.

Q3: Are these interest rates guaranteed?
A: Interest rates can change over time. Fixed-rate accounts guarantee the rate for a set period, while variable rates can fluctuate with market conditions.

Q4: What factors affect savings interest rates?
A: The Bank of England base rate, inflation, economic conditions, and competition among providers all influence savings rates.

Q5: Are there any tax implications on savings interest?
A: In the UK, you have a Personal Savings Allowance. Basic rate taxpayers can earn £1,000 interest tax-free, higher rate taxpayers £500, and additional rate taxpayers get no allowance.