How do you use this tool?
- Pick your region — United States or United Kingdom. The choice persists in your browser.
- Enter principal, annual rate, and term in years.
- Choose Simple or Compound interest. Compound mode lets you pick a frequency (annual, semi-annual, quarterly, monthly, daily).
- US: pick your federal marginal tax bracket on the interest income (0% for tax-deferred / Roth). UK: tick the ISA box for tax-free, otherwise pick your income-tax band.
- Read the net final amount, net interest, APY, and a daily-accrual figure useful for loan-day-cost questions.
What This Tool Does
The calculator runs both simple and compound interest math with region-aware tax treatment behind the scenes. The region toggle at the top of the page picks which tax system the calculator applies; your choice persists for the next visit.
- United States — federal marginal-tax-bracket dropdown (0% / 10% / 12% / 22% / 24% / 32% / 35% / 37%). Pick 0% for Roth IRA / Roth 401(k) / Traditional IRA / Traditional 401(k) / HSA — everything where interest grows tax-deferred or tax-free inside the wrapper. Pick your bracket for a regular taxable account.
- United Kingdom — ISA-tax-free toggle, plus an income-tax-band dropdown (0% Personal Savings Allowance / 20% basic / 40% higher / 45% additional) for non-ISA accounts.
Both regions support simple and compound interest with a frequency picker (annual, semi-annual, quarterly, monthly, daily). The output shows the gross final amount, gross interest, tax on interest, net interest, net final amount, APY, and daily accrual at t=0.
How Does the Math Work?
Simple Interest
I = P × r × t
A = P + I = P × (1 + r × t)
APY = r (no compounding — APY equals nominal rate)Where P is principal, r is the annual rate as a decimal, and t is time in years. Used for most US auto loans, personal loans, federal student loans, and short-term Treasury bills.
Compound Interest
A = P × (1 + r/n)^(n × t)
I = A − P
APY = (1 + r/n)^n − 1Where n is the number of compounding periods per year (12 for monthly, 365 for daily). Used for nearly every modern savings account, brokerage interest, CDs (typically monthly), and any growth-asset projection.
Tax on Interest
tax_on_interest = I × tax_rate
net_interest = I − tax_on_interest
net_final = P + net_interestThe tax rate comes from your region-specific selection. For US Roth / tax-deferred accounts and UK ISAs, set 0% — the gross figures are also the net figures.
Which Tax Rate Should You Pick (US)?
The federal marginal rate that applies to your interest income is the same as the rate on your last dollar of wages — not your effective rate. If you’re in the 22% bracket on wages, you’re in the 22% bracket on interest. The 2025 brackets:
- 0% — Tax-deferred accounts (Traditional IRA, 401(k), HSA) where interest grows untaxed; Roth accounts where it grows tax-free.
- 10% — Single income up to $11,925.
- 12% — Single $11,925 – $48,475.
- 22% — Single $48,475 – $103,350. The most common bracket for middle-class W-2 earners.
- 24% — Single $103,350 – $197,300.
- 32% / 35% / 37% — Higher-income brackets.
State income tax on interest is not modeled here — varies by state.
Which Tax Treatment Should You Pick (UK)?
- ISA (tax-free) — Cash ISA, Stocks & Shares ISA, Innovative Finance ISA. Interest is not subject to income tax. Annual contribution allowance £20,000 (2025/26).
- 0% (PSA-covered) — Outside an ISA, the Personal Savings Allowance gives basic-rate taxpayers £1,000 of tax-free interest (£500 for higher-rate, £0 for additional-rate). For amounts within the PSA, the effective rate is 0%.
- 20% / 40% / 45% — Income tax on interest above the PSA, taxed at your marginal income-tax band.
What Are Common Use Cases?
Comparing a tax-free ISA against a higher-yielding regular account. A 5% UK Cash ISA versus a 5.5% taxable savings account at the higher 40% rate: ISA wins because 5.5% × (1 − 0.40) = 3.3% net, which is lower than the ISA’s 5% tax-free.
Long-term retirement projection (US). $100,000 at 7% nominal compounded monthly for 30 years inside a Roth IRA: about $811,649 net (no tax). Same numbers in a taxable account at 24% marginal: about $658,053 net. The wrapper choice is worth ~$150k over 30 years.
Loan day-cost estimation. A $30,000 auto loan at 7.5% APR has a daily accrual of about $6.16. Paying a week early saves ~$43.
APY arbitrage between savings products. Bank A advertises 4.5% APR with monthly compounding (APY ≈ 4.59%). Bank B advertises 4.55% APR with annual compounding (APY = 4.55%). Bank A wins by 0.04 percentage points despite the lower headline rate.
Comparing simple-interest auto-loan offers. Two dealerships quote 7% and 8% APR simple interest on $25,000 over 5 years. The 1% rate difference costs $1,250 in total interest — meaningful enough to negotiate.
What’s the APY for Common Compounding Frequencies?
For a 5% nominal rate:
| Frequency | Periods/year | APY |
|---|---|---|
| Annual | 1 | 5.0000% |
| Semi-annual | 2 | 5.0625% |
| Quarterly | 4 | 5.0945% |
| Monthly | 12 | 5.1162% |
| Daily | 365 | 5.1267% |
Daily compounding adds about 11 basis points (0.11%) over annual compounding at 5% nominal. The marginal benefit of switching from monthly to daily is about 1 basis point.
Where Do the Tax Brackets Come From and What About Privacy?
US brackets are the 2025 IRS-published federal marginal rates (Rev. Proc. 2024-40). UK rates are HMRC’s 2025/26 income-tax bands. The Personal Savings Allowance has been £1,000 / £500 / £0 since April 2016.
The calculator runs entirely client-side. Your principal, rate, term, and tax-bracket pick never leave your browser — no analytics, no signup, no server. The region (US or UK) is the only thing stored, and only in your own browser’s localStorage.
Frequently Asked Questions
Does this tool model variable-rate accounts? No. The calculator assumes a constant annual rate over the entire term — it’s the right model for fixed-rate CDs, fixed-rate bonds, fixed-rate loans, and back-of-envelope projections. For a variable-rate savings account, plug in your current rate; the result is a snapshot, not a forecast.
Does this account for inflation? No. The output is in nominal currency units. To convert to real (inflation-adjusted) terms, divide the final amount by (1 + expected_inflation)^years. Real returns are typically 2–3 percentage points lower than nominal in long-run modeling.
What about the Additional Rate Threshold change in the UK? The £125,140 threshold for the 45% additional-rate band has been in place since April 2023 (reduced from £150,000). The calculator uses the current threshold; the dropdown picks the rate, the threshold is just for context.
Why is daily accrual computed at t=0 instead of averaging? Daily accrual at t=0 is the most useful single number for loan-timing decisions (“what does each extra day on this balance cost?”). Averaging over the full term would smooth out the figure and make per-day comparisons less actionable. For total interest over a term, the gross-interest output is the right number.
Which Related Tools Pair Well With This One?
For deeper compounding scenarios use the dedicated compound interest calculator; for loan amortization see the loan calculator; for after-tax pricing the VAT/sales-tax calculator.
Last updated: