1. What is Simple Interest?

Simple interest is a method of calculating interest where the interest is computed only on the principal amount, not on any previously earned interest. It's commonly used for short-term loans and savings calculations.

2. How Does the Calculator Work?

The calculator uses the simple interest formula:

Where:

• \( P \) — Principal amount (GBP)
• \( r \) — Annual interest rate (as a decimal)
• \( t \) — Time in years

Explanation: The formula calculates the interest earned or paid based on the initial principal amount, the annual interest rate, and the time period in years.

3. Importance of Interest Calculation

Details: Understanding interest calculations helps in financial planning, comparing savings options, and making informed decisions about investments and loans.

4. Using the Calculator

Tips: Enter the principal amount in GBP, annual interest rate as a percentage, and time in years. 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: Is this calculator suitable for UK savings accounts?
A: Yes, this calculator uses GBP currency and is designed for UK savings interest calculations.

Q3: How often is interest typically paid on savings accounts?
A: Interest can be paid monthly, quarterly, or annually depending on the account terms. This calculator assumes annual calculation.

Q4: Are there any taxes on savings interest in the UK?
A: Yes, savings interest may be subject to tax depending on your personal savings allowance and income tax band.

Q5: Can I use this for loan interest calculations?
A: Yes, the same formula applies for calculating interest on simple interest loans.