Savings Interest Calculator
Enter your deposit, interest rate, and term to see exactly how much you could earn over time.
Final Balance
£25,947
gross, before tax
Interest Earned
+£3,947
gross interest
Net After Tax
£25,947
est. net balance
Tax Estimate
£0
over 5 yrs
Balance Growth Over Time
- Total Balance
- Money Deposited
| Year | Balance | Deposited | Interest Earned |
|---|---|---|---|
| Year 1 | £12,910 | £12,400 | +£510 |
| Year 2 | £15,953 | £14,800 | +£1,153 |
| Year 3 | £19,136 | £17,200 | +£1,936 |
| Year 4 | £22,465 | £19,600 | +£2,865 |
| Year 5 | £25,947 | £22,000 | +£3,947 |
AER calculator: convert AER to monthly interest
AER (Annual Equivalent Rate) is the rate you would earn in a year once interest has been added to your balance and earned on itself. Enter your balance and rate to see the monthly rate, the gross equivalent and what you would earn.
AER
4.50%
Gross rate (paid monthly)
4.41%
Interest in month one
£36.75
Interest over 12 months
£450.00
Month one is shown for a balance with no deposits or withdrawals. AER assumes interest stays in the account for the full year.
How much interest will I earn on my savings?
It comes down to three things: how much you have saved, the rate your account pays, and how long you leave the money there. Put your own numbers into the calculator above and it shows what you will earn each year, plus what is left after tax.
The rate you see on a savings account is usually the AER, short for Annual Equivalent Rate. It already includes the effect of interest being added more than once a year, so you can compare accounts fairly. If an account pays 4.5% AER, £1,000 grows by £45 over twelve months.
What different balances earn at 4.5% AER
These figures show the first year of interest on a lump sum with no further deposits. Your real number will move a little with the rate you get.
| You save | Interest in a year | Roughly per month |
|---|---|---|
| £1,000 | £45 | £3.75 |
| £5,000 | £225 | £18.75 |
| £10,000 | £450 | £37.50 |
| £20,000 | £900 | £75 |
| £50,000 | £2,250 | £187.50 |
| £100,000 | £4,500 | £375 |
Adding to your pot matters more than most people expect. Start with £10,000, add £200 a month, and earn 4.5% for five years, and you end up with roughly £25,900. You paid in £22,000 of that, so about £3,900 is interest.
Typical UK savings rates by account type
| Account type | Typical AER | Access |
|---|---|---|
| Easy-access savings | 4.5% to 4.8% | Withdraw anytime |
| 1-year fixed bond | 4.6% to 5.2% | Locked for 1 year |
| Cash ISA (easy access) | 4.2% to 4.9% | Tax-free, withdraw anytime |
| Regular saver | 5.5% to 7% | Fixed monthly deposit |
| Current account (in credit) | 1% to 5% | Usually capped balance |
These are rough ranges. Rates change often, so check the live rate before you open anything.
Will I pay tax on my savings interest?
Often not. Most people get a Personal Savings Allowance, which lets you earn a set amount of interest each year without paying tax. Anything above it is taxed at your normal income tax rate.
Basic rate (20%)
£1,000 tax-free
Higher rate (40%)
£500 tax-free
Additional rate (45%)
No allowance
ISA savings
Always tax-free
To put that in pounds: at 4.5%, a basic-rate taxpayer reaches the £1,000 allowance with about £22,000 in savings. A higher-rate taxpayer reaches the £500 allowance at about £11,000. Past that point, a Cash ISA starts to make sense.
Cash ISA or standard savings account?
Standard savings account
✓Often a slightly higher headline rate
✓No limit on how much you put in
✗Interest above your allowance is taxed
Cash ISA
✓All the interest is yours, tax-free
✓No allowance to keep track of
✗You can only pay in £20,000 per tax year
Three ways to earn more from the same money
- Check your rate. Plenty of big-bank accounts still pay well under 2%, while the best easy-access accounts pay more than double that.
- Pay in regularly. A regular saver or a monthly standing order adds to the balance that earns interest.
- Use the ISA allowance before 5 April. Unused allowance does not carry over.
Please note
This calculator is a guide, not financial advice. Tax figures use the 2026/27 Personal Savings Allowance rules and may not match your situation. Check current rates with your provider, and speak to a qualified adviser before making big savings decisions.
Worked Example: £10,000 at 4% AER for Five Years
With no withdrawals, £10,000 at 4% AER grows to about £12,167 after five years, so you earn £2,167 in interest. The interest each year gets bigger because it is calculated on the growing balance.
Frequently Asked Questions
How is savings interest calculated?
Interest is a percentage of your balance, added at set intervals. AER shows the yearly total including compounding.
Is the rate fixed?
Easy-access rates are variable and can change at any time. Fixed accounts hold the rate for the whole term.
Will I pay tax on the interest?
Only above your Personal Savings Allowance. Interest in an ISA is always tax-free.
Savings in the US?
Best high-yield savings accounts in the US (top rates up to 5.00% APY)
Frequently Asked Questions
What does AER mean on a savings account?
AER stands for Annual Equivalent Rate. It is the interest you would earn over a year once interest paid during the year is added to your balance and earns interest itself. It lets you compare accounts that pay interest monthly or annually on a like-for-like basis.
What is the difference between AER and the gross rate?
The gross rate is the headline rate before compounding. If interest is paid monthly, the AER is slightly higher than the gross rate. For example, 4.41% gross paid monthly is about 4.50% AER. If interest is paid once a year, the two are the same.
How do I work out monthly interest from AER?
Convert AER to a monthly rate with (1 + AER) to the power of 1/12, minus 1. At 4.5% AER the monthly rate is about 0.367%, so £10,000 earns around £36.70 in the first month. Use the AER calculator on this page to do it for your own figures.
What is the difference between simple and compound interest?
Simple interest is calculated only on your original deposit. Compound interest is calculated on your deposit plus any interest already earned, causing your savings to grow faster over time.
How often is interest compounded?
Most UK savings accounts compound interest monthly or annually. Monthly compounding gives slightly higher returns than annual compounding at the same AER rate.
Will I pay tax on my savings interest?
Basic-rate taxpayers get a £1,000 Personal Savings Allowance (PSA). Higher-rate taxpayers get £500. Additional rate taxpayers get nothing. Interest earned above your allowance is taxed at your marginal rate. ISA interest is always tax-free.
What is a realistic interest rate?
As of October 2026, competitive UK easy-access accounts offer around 4.5–4.8% AER, with fixed Cash ISAs up to 5.25%. Fixed-rate bonds can offer slightly more for locking money away. Always compare current live rates before opening an account.
Key Terms Explained
Plain-English definitions of the financial terms used in this calculator.
- AER (Annual Equivalent Rate)
- The interest rate on savings accounts once compounding is included, showing what you would actually earn over a year. Use AER, not the headline gross rate, to compare savings accounts fairly.
- Compound Interest
- Interest earned on both your original money and on interest already added. Over long periods compounding accelerates growth dramatically, the earlier you start saving or investing, the more it works in your favour.
- Principal
- The original amount borrowed or invested, before any interest. On a repayment mortgage or loan, each monthly payment covers interest plus a slice of the principal until the balance reaches zero.
- ISA (Individual Savings Account)
- A UK account where interest, dividends and capital gains are completely tax-free. You can pay in up to £20,000 per tax year across Cash ISAs, Stocks & Shares ISAs and Lifetime ISAs.
Recommended Next Steps
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Not Financial Advice: This calculator is for informational and educational purposes only. Results are estimates and do not constitute financial advice, recommendations, or regulated advice. We are not authorised or regulated by the Financial Conduct Authority (FCA). Always consult a qualified financial adviser for personalised advice. Tax treatment depends on your individual circumstances and may change. Tax laws and rates may change. Past performance does not guarantee future results.
