Compound Interest Calculator
How your money grows over time — with real returns, milestones, and the cost of delay
Milestone Tracker
The Cost of Delay
What happens if you wait 5 years before you start?
Understanding Compound Interest for 2026/27
Compound interest is the most powerful force in long-term investing — Einstein allegedly called it the eighth wonder of the world. It’s also the reason starting young matters so much more than contributing large sums later. A £200 monthly investment starting at age 25 can outperform a £500 monthly investment starting at age 40, even though the late starter contributes much more in absolute terms. The difference is 15 extra years of compounding.
The calculator above models real-world UK investing: it lets you compare a taxable General Investment Account (GIA) against a tax-free Stocks & Shares ISA, accounts for the 10% or 20% gap that tax creates over decades, and shows you the cost of waiting in concrete terms. The £20,000 annual ISA allowance is one of the most valuable tax shelters available to UK investors, but only if you use it — "use it or lose it" applies annually and unused allowance cannot be carried forward.
A few critical realities: 5-7% is a realistic long-term nominal return for a diversified global equity portfolio (before inflation), 3-5% real (after inflation). Markets go up and down year to year, and the compound curve is never smooth — some decades look far below the long-run average. Consistent investing through ups and downs beats timing the market for almost everyone. The compound interest calculator above shows the full picture and highlights milestone years: when you hit £100k, £250k, £500k, and £1 million.
Key Figures for the 2026/27 Tax Year
- Typical long-term equity return: 5-7% nominal / 3-5% real
- ISA annual allowance (2026/27): £20,000
- ISA Junior allowance: £9,000
- GIA tax — interest: Marginal rate above PSA (£1,000 / £500 / £0)
- GIA tax — dividends: 8.75% / 33.75% / 39.35% above £500 allowance
- GIA tax — capital gains: 18% / 24% above £3,000 AEA
- Rule of 72: Years to double = 72 ÷ annual return %
- ISA wrapper protection: All growth, income and gains tax-free forever
How to Use the Compound Interest Calculator
- Enter your starting balance.
- Enter your monthly contribution.
- Enter the expected annual growth rate (5-7% for long-term equities is a reasonable default).
- Enter the investment period in years.
- Select account type: ISA (tax-free) or GIA (taxable at your band).
- Review the projected value, total contributed, total growth, and milestone years.
- Use the "cost of waiting" feature to see what 5 years of delay costs in final value.
Frequently Asked Questions
How much will £200 per month grow to in 30 years?
At a 6% annual growth rate, £200 per month invested for 30 years grows to roughly £201,000 — from just £72,000 contributed. That £129,000 of growth is compound interest at work. At 7% the final value is around £244,000, and at 5% it is £167,000. The calculator shows the exact figures for your inputs, split between contributions and compound growth.
Is an ISA or General Investment Account better?
For most UK investors, a Stocks & Shares ISA wins decisively. ISAs shield all growth, dividends, and gains from UK tax forever. GIAs are taxed on dividends above £500 (at 8.75%/33.75%/39.35%) and on capital gains above £3,000 (at 18%/24%). Over 20-30 years of compounding, the tax drag on a GIA can reduce final returns by 10-20% versus an equivalent ISA.
What is a realistic investment growth rate to use?
For a long-term diversified global equity portfolio, 5-7% nominal (before inflation) is a reasonable assumption. After subtracting 2-3% inflation, real returns are more like 3-5%. Bonds historically return less, around 3-5% nominal. Cash typically matches inflation at best. Be honest with yourself — using 10%+ assumptions leads to disappointment and bad retirement planning.
Does it matter when I invest during the year?
Yes, slightly. Investing at the start of the tax year (6 April) gives 12 extra months of compounding versus investing at year-end. Over 25 years this can add 2-3% to your final value. However, trying to time specific market entry points (e.g., waiting for dips) almost never works — consistent regular investing beats market timing for almost everyone.
What is the Rule of 72?
The Rule of 72 is a quick way to estimate doubling time: divide 72 by the annual growth rate to get the number of years to double. At 6% growth, money doubles in 12 years. At 9%, it doubles in 8 years. At 4%, it takes 18 years. Useful for quick mental math without a calculator.
Should I contribute a lump sum or drip-feed investments?
Mathematically, lump-sum investing wins on average over dollar-cost averaging (DCA) because markets trend up over time — the sooner your money is in, the more days it compounds. However, DCA reduces regret risk if markets fall right after a large lump-sum investment. For psychological reasons, many investors are happier with DCA even though lump-sum is statistically better.
Related Calculators
- ISA vs SIPP Calculator — full lifecycle modelling of both tax wrappers
- Retirement Pension Calculator — apply compound interest to pension planning
- Savings Interest Tax Calculator — for cash savings outside investing
- Inflation Calculator — see the real purchasing power of future values
Official Sources
- ISAs — official gov.uk guide
- Compound interest explained — MoneyHelper
- FCA consumer investing guidance
Last reviewed April 2026. Figures and rules apply to the 2026/27 UK tax year. This tool is for guidance only and does not constitute financial advice.
