What's the difference between AER and gross rate?

AER shows what you'd earn over a full year including the effect of compounding, so it's the number to compare accounts on. Gross rate ignores compounding and can look similar to AER while actually paying out less, particularly on accounts that compound more often than annually.

Do I need to declare savings interest to HMRC myself?

Usually not. Banks and building societies report interest paid directly to HMRC, who typically collect any tax owed by adjusting your tax code automatically. You'd only need to declare it yourself through Self Assessment if you already file one for other reasons, or if HMRC contacts you directly about it.

Can I have both an ISA and a LISA at the same time?

Yes. A LISA's £4,000 annual limit sits inside your overall £20,000 ISA allowance rather than on top of it, so contributing the full £4,000 to a LISA still leaves £16,000 available across other ISA types in the same tax year.

What happens if I withdraw from a LISA early?

Withdrawing for anything other than a first home worth up to £450,000, or after you turn 60, triggers a 25% government charge on the amount withdrawn. Because that charge is calculated on the total including the bonus, it claws back the bonus in full plus a small amount of your own money.

Why does the Real Value figure show less than my balance?

It's your balance adjusted for the inflation rate you entered, showing what that money would buy compared to today. If your inflation assumption is higher than your interest rate, the real value can end up lower than what you actually deposited, even though your account balance itself never falls.

Savings Calculator — UK Pay Calculator

How this calculator works

Enter your starting deposit, any regular monthly top-up, and the AER (Annual Equivalent Rate) shown on your account, and this tool compounds it forward month by month for the term you choose. Compounding means each month's interest gets added to your balance before the next month's interest is calculated, so your money earns interest on its own interest, not just on what you originally put in.

Compounding frequency changes the maths slightly even at the same headline rate. Monthly compounding, the most common structure for UK savings accounts, adds interest to your balance twelve times a year. Daily compounding adds it 365 times a year and edges out monthly by a small amount over a long term, since interest starts earning its own interest sooner. Annual compounding, the least generous of the four, only adds interest once a year. Check your account's terms for which one applies, it's stated alongside the AER.

Account type changes how much of your interest is actually yours to keep. A Standard savings account's interest is taxable once it exceeds your Personal Savings Allowance, which depends on your Income Tax band. An ISA shelters all interest from tax entirely, regardless of amount. A LISA (Lifetime ISA) does the same and adds a 25% government bonus on top, but only if you're eligible and only up to the annual contribution limit, both covered below.

The inflation field is optional and doesn't change your actual balance, it only shows what that balance would be worth in today's money, so you can see whether your savings are genuinely growing in real terms or just keeping pace with rising prices.

Understanding your inputs

Initial Deposit is whatever lump sum you're starting with, £0 if you're starting from scratch.

Monthly Contribution is a regular amount added every month on top of the initial deposit. Leave it at £0 to model a lump sum left to grow on its own.

Interest Rate (AER) should come directly from your account's terms, not a rate you've seen advertised elsewhere, since AER already factors in compounding and lets you compare accounts on equal terms.

Account Type determines the tax treatment. Choosing ISA or LISA hides the tax band field entirely, since tax-free means tax-free regardless of what you earn.

Your Tax Band only matters for Standard accounts, and sets your Personal Savings Allowance, the amount of interest you can earn tax-free each year before HMRC takes a share.

Worked example

Take a £20,000 lump sum in a Standard savings account at 4.5% AER, monthly compounding, held for one year, owned by a higher-rate taxpayer.

After twelve months of monthly compounding, that £20,000 grows to £20,918.80, meaning £918.80 in interest. A higher-rate taxpayer's Personal Savings Allowance is £500, so £418.80 of that interest is taxable. At the 40% higher rate, that's £167.52 owed in tax on the year's interest, an amount HMRC typically collects by adjusting your tax code rather than requiring a separate payment, since your bank reports interest directly to HMRC. Move the same £20,000 into an ISA instead, at the same rate, and the full £918.80 stays tax-free.

2026/27 rates at a glance

Personal Savings Allowance	Tax-free interest/year
Basic rate taxpayer (20%)	£1,000
Higher rate taxpayer (40%)	£500
Additional rate taxpayer (45%)	£0

ISA and LISA facts	2026/27
Overall ISA allowance	£20,000
LISA annual contribution limit	£4,000 (within the £20,000 total)
LISA government bonus	25%, up to £1,000/year
LISA eligible age	18–39 to open, can pay in until 50
LISA early withdrawal charge	25%, unless buying a first home (up to £450,000) or aged 60+

Ask your provider: confirm the AER, not a lower "gross rate," when comparing accounts, and check whether the rate is fixed for the term or variable and can drop without notice. For a LISA specifically, confirm your provider only lets you pay in up to £4,000 in the tax year, since it's a hard HMRC limit, not a house rule.

Common Mistakes

The most common one is depositing more than £4,000 into a LISA in a single tax year and assuming the excess still earns the bonus. It doesn't, HMRC's £4,000 limit is a hard cap covering everything you pay in that year, initial deposit included, not just ongoing contributions. This calculator's default £5,000 initial deposit is actually too large for a LISA on its own for exactly this reason, so if you're modelling a LISA, check your total contribution across the year stays at or under £4,000 before trusting the bonus figure shown.

Another is confusing the advertised rate with the AER. Some accounts quote a lower "gross" rate that ignores compounding, which understates what you'll actually earn compared to the AER figure this calculator expects.

People also frequently overlook that interest on joint accounts is usually split 50/50 between account holders for tax purposes, each using their own Personal Savings Allowance, which changes the tax calculation if you're comparing a joint account to a sole one.

Finally, it's easy to assume ISA interest is automatically better than a taxable account. If your total interest across all your savings sits comfortably under your Personal Savings Allowance anyway, a taxable account paying a slightly higher rate can outperform an ISA paying less, since tax-free only matters once you're actually exceeding the threshold.

Sources and verification

Figures verified against HMRC and GOV.UK on 03 September 2026. Applies to the 2026/27 tax year.

Personal Savings Allowance thresholds and Income Tax bands: HMRC. ISA overall allowance and Lifetime ISA rules, including the £4,000 limit, 25% bonus, eligible ages and withdrawal charge: GOV.UK.