1. What is Accrued Interest?

Accrued interest refers to interest that has been earned but not yet paid. In the UK, accrued interest may be subject to tax depending on the type of account and the taxpayer's circumstances.

2. How Does the Calculator Work?

The calculator uses the simple interest formula:

Where:

• \( Principal \) — Initial amount in pounds (£)
• \( Rate \) — Annual interest rate (in decimal form)
• \( Time \) — Time period in years

Note: This calculates gross interest before any tax deductions.

3. UK Tax Implications

Details: In the UK, interest income may be taxable depending on your tax band and personal savings allowance. Basic rate taxpayers can earn £1,000 interest tax-free (2023/24 tax year).

4. Using the Calculator

Tips: Enter principal in pounds, rate as a decimal (e.g., 0.05 for 5%), and time in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Is accrued interest taxable in the UK?
A: Generally yes, but it depends on your personal savings allowance and tax band. Some accounts like ISAs are tax-free.

Q2: How is the rate converted from percentage to decimal?
A: Divide the percentage by 100 (e.g., 5% becomes 0.05).

Q3: Does this calculator account for compound interest?
A: No, this calculates simple interest only. For compound interest, a different formula is needed.

Q4: When is accrued interest paid in the UK?
A: Depends on the account terms - some pay monthly, quarterly, annually, or at maturity.

Q5: Are there tax-free savings options in the UK?
A: Yes, ISAs (Individual Savings Accounts) allow you to earn interest tax-free up to annual limits.