UK Savings Calculator
See what your savings could grow to with a monthly deposit, how much of the total is interest, and how much of that interest you lose to tax once you pass your Personal Savings Allowance.
| Total paid in | £35,000 |
|---|---|
| Gross interest earned | £10,391 |
| Tax on the interest | −£417 |
| Value after tax | £44,974 |
£8,306 of your interest is covered by your allowances and costs you nothing. From year 6 the interest outgrows them, and tax is owed on the rest. HMRC collects it through your tax code or Self Assessment, so it comes out of your pocket rather than out of the account.
- Your deposits
- Interest you keep
- Interest lost to tax
After 10 years the balance reaches £45,391. Of that, £10,391 is interest, and £417 (4.0% of the interest) goes to HMRC.
| Year | Balance | Paid in | Interest | Tax to date |
|---|---|---|---|---|
| 0 | £5,000 | £5,000 | £0 | £0 |
| 1 | £8,286 | £8,000 | £286 | £0 |
| 2 | £11,721 | £11,000 | £721 | £0 |
| 3 | £15,310 | £14,000 | £1,310 | £0 |
| 4 | £19,060 | £17,000 | £2,060 | £0 |
| 5 | £22,979 | £20,000 | £2,979 | £0 |
| 6 | £27,077 | £23,000 | £4,077 | £8 |
| 7 | £31,357 | £26,000 | £5,357 | £51 |
| 8 | £35,829 | £29,000 | £6,829 | £132 |
| 9 | £40,502 | £32,000 | £8,502 | £253 |
| 10 | £45,391 | £35,000 | £10,391 | £417 |
Information
A savings balance grows in two ways: the money you put in, and the interest it earns. Interest compounds, so it earns interest of its own, and the chart above splits the balance into the two so you can see how much of the total you never paid in.
Tax on savings interest. Banks pay interest gross: since April 2016 they no longer take tax off at source. Instead you get a Personal Savings Allowance, which covers the first £1,000 of interest a year if you are a basic rate taxpayer, £500 if you are a higher rate taxpayer, and nothing at all if you are an additional rate taxpayer. There is also a separate starting rate for savings, worth up to £5,000 of interest at 0%, for people with little other income. Interest above your allowance is taxed at your normal Income Tax rate, collected through your tax code or Self Assessment.
Why the allowance runs out. With a growing balance, each year's interest is bigger than the last, so a saver who pays no tax today can cross the allowance without ever noticing. This calculator names the first year the tax starts, and the orange band on the chart is every pound of interest you lose to it from then on.
Paying the tax out of the account. Normally you do not: HMRC bills you through your tax code or Self Assessment, so the money comes from your salary and the savings are left alone to compound. Tick the box and the calculator instead takes each year's bill out of the account as it falls due, which is what many people actually do when their savings are the only spare cash they have. It is worth seeing, because it costs more than the tax. Money you hand to HMRC stops earning interest, and it stops earning it for every year that remains, so you end up behind by the growth you gave up as well as by the tax. The effect is small when the tax starts late and the term is short, and brutal when it does not: a higher rate taxpayer with £60,000 saved, adding £500 a month for 25 years, pays around £19,500 less tax by paying it from the pot, because the pot is smaller, and still ends up roughly £29,000 worse off.
Where the ISA fits. Interest earned inside an ISA is free of tax, in exchange for a £20,000 limit on what you can pay in each year. Those are different rules, so they have their own page: try the ISA calculator.
What's simplified. The rate is held flat for the whole term, whereas easy access rates move with the Bank of England base rate. The monthly deposit and your income are held flat too, and every future year is taxed under this year's bands, so the slow drag of frozen thresholds is not modelled. The figures are in future pounds, not adjusted for inflation: this matters more for cash than for anything else, because a savings account paying less than inflation loses real value even while the number on the statement goes up. Open the full planner to model a changing rate, a rising deposit, and your savings in today's money.
FAQ
- Do I pay tax on my savings interest?
Only above your Personal Savings Allowance. That allowance is £1,000 of interest a year if you are a basic rate taxpayer, £500 if you are a higher rate taxpayer, and nothing at all if you are an additional rate taxpayer. Below it, your interest costs you nothing. Above it, the excess is taxed at your normal Income Tax rate. Banks pay interest gross, so HMRC collects any tax through your tax code or Self Assessment rather than taking it out of the account.
- When will my interest start being taxed?
When one year's interest first exceeds your allowance, which is a moving target: a growing balance earns more interest every year, so a saver who pays nothing today can cross the allowance without noticing. The calculator works out the year for you and names it. With £5,000 saved, £250 a month going in and a 4.5% rate, a basic rate taxpayer crosses the £1,000 allowance in year 6.
- What is the starting rate for savings?
An extra band of up to £5,000 of savings interest taxed at 0%, aimed at people with little other income. It shrinks by £1 for every £1 of non-savings income above your Personal Allowance, so anyone earning much more than £12,570 gets none of it. Put a low figure in "your other annual income" above to watch it apply.
- Should I pay the tax out of the savings account itself?
You do not have to, and normally you should not. HMRC never takes tax out of a savings account: it collects through your tax code or Self Assessment, so the money comes from your salary and the savings are left to compound. Tick Pay the tax out of this account to model funding the bill from the pot instead, which is what a lot of people do when their savings are the only spare cash they have.
It costs more than the tax. Every pound you take out stops earning interest, and stops earning it for every year left in the term. Paradoxically your tax bill gets smaller, because the pot is smaller and so earns less taxable interest, and you are still worse off. A higher rate taxpayer with £60,000 saved, adding £500 a month for 25 years, pays about £19,500 less tax this way and ends up roughly £29,000 behind. The calculator shows that gap as Cost of paying from this pot.
- What if I saved into an ISA instead?
Then none of this interest would be taxed. An ISA is a wrapper rather than a product, and everything earned inside one is free of Income Tax and Capital Gains Tax, with nothing to declare. The trade is a limit: £20,000 a year across all of your ISAs. Those are different rules, so they have their own page: try the ISA calculator.
- Are Scottish savers taxed differently on savings interest?
No, and that is why there is no Scotland option on this page. Scotland sets its own bands for income from work and pensions, but tax on savings interest is reserved UK-wide, so a Scottish taxpayer is taxed on savings interest under exactly the same allowance, rates and bands as the rest of the UK.
- Does this account for inflation?
No. The figures are in future pounds, so a £45,000 balance in ten years buys less than £45,000 of today's goods. This matters more for cash than for anything else: a savings account paying less than inflation loses real value even while the number on the statement goes up. The full planner shows your savings in today's money as well as future pounds.
- What else is not modelled?
Three things worth knowing. The rate is held flat, whereas easy access rates move with the Bank of England base rate and get cut without notice. Your other income is held flat, so a pay rise that pushed you into the higher rate band would halve your allowance, and that is not shown. And every future year uses this year's tax bands, so the slow drag of frozen thresholds is not modelled. Treat the long run figure as an indication, not a promise.
Sources
- Tax on savings interest (GOV.UK)
Disclaimer
Not financial advice. The figures above are a projection from the inputs and assumptions you provided; what you actually end up with depends on the rate your account actually pays, which can be cut at any time, on what you actually pay in, and on future tax rules. The tax figure assumes the income you entered is your only other taxable income and that this year's bands apply to every future year. Check your provider's own figures and consult a qualified adviser before making a decision based on these numbers.
