The short answer
Inflation is how fast prices rise. With CPI inflation at 3.5%, something that costs £100 today costs about £103.50 a year from now. If your savings earn less than that, your balance still goes up but it buys less.
Left in an account paying nothing, £10,000 would buy what £8,420 buys today after five years. To keep up, your savings need to earn more than inflation after tax, and a Cash ISA makes that easier because the interest is tax-free.
Key point
In November 2026 the Bank of England raised Bank Rate to 4% and said it expects inflation to rise to around 5% by the middle of 2027, before falling back. A rate that beats inflation today may not beat it next year, so check again when your rate or a bonus changes.
How inflation eats your savings
Your balance is not the whole story. What matters is what your money can buy, and that shrinks every year prices rise faster than your interest.
| Your rate, tax-free | After 1 year | After 5 years | After 10 years |
|---|---|---|---|
| Earning nothing | £9,662 | £8,420 | £7,089 |
| 2% interest | £9,855 | £9,296 | £8,642 |
| 3.5%, the same as inflation | £10,000 | £10,000 | £10,000 |
| 4.5% interest | £10,097 | £10,493 | £11,009 |
| 5% interest | £10,145 | £10,746 | £11,548 |
Interest added once a year, no tax, inflation staying at 3.5%.
Small gaps add up. At 3.5% inflation, prices double in about 20 years, so money that earns nothing loses half its buying power over that time.
The calculator uses the exact version: (1 + rate) ÷ (1 + inflation) − 1.
How to beat inflation with your savings
- Move money that earns little. Many current accounts pay nothing. Easy access Cash ISAs and savings accounts pay more, and the best rates in our table are above 3.5% today.
- Use your ISA allowance. You can put up to £20,000 a tax year into ISAs, and interest in a Cash ISA is never taxed. That matters more as tax on savings interest rises from April 2027.
- Watch bonus rates. Many top rates include a bonus for the first 12 months. Note when it ends and move if the rate drops below inflation.
- Consider fixing. Fixed rate accounts lock in a rate for one to five years. Useful if rates fall, but you usually cannot take money out early.
- Invest money you will not need for years. A Stocks and Shares ISA gives your money the chance to grow faster than inflation over the long term, with the risk that values fall.
Our guide to the best Cash ISAs compares rates from investing platforms and banks, checked every week.
Tax on savings interest
Outside an ISA, interest counts as income. You can earn some tax-free through your Personal Savings Allowance, and tax is due on interest above it.
| Basic rate | Higher rate | Additional rate | |
|---|---|---|---|
| Personal Savings Allowance | £1,000 | £500 | £0 |
| Tax on interest above it, 2026 to 2027 | 20% | 40% | 45% |
| Tax on interest above it, from 6 April 2027 | 24% | 44% | 49% |
| Interest in a Cash ISA | None | None | None |
From GOV.UK and HM Treasury’s Budget 2026 overview. If your other income is below £17,570, you may also get up to £5,000 of interest tax-free through the starting rate for savings.
Tax raises the rate you need. With £50,000 saved and inflation at 3.5%, a basic rate taxpayer needs about 3.97% and a higher rate taxpayer about 5.46% to keep up from April 2027. In a Cash ISA, 3.5% is enough. Read more in our guide to tax on savings interest.
Cash or investing?
Keep it in cash if
- You may need the money in the next few years.
- It is your emergency fund.
- You would lose sleep if its value fell.
Consider investing if
- You can leave it for five years or more.
- You already have cash set aside for emergencies.
- You can ride out falls without selling.
Many people do both: cash for the short term and a Stocks and Shares ISA for the long term. Our Stocks and Shares ISA calculator shows what investing could grow to, and Find your broker matches you to a platform.
What inflation has done since a given year
See how much more you would need today to buy what a sum bought in an earlier year.
£1,000 in 2016 would need £1,431 today to buy the same things. Prices have risen 43% since then.
Uses the ONS CPI index: the yearly average for the year you choose against September 2026. CPI figures before 1996 are estimates published by the ONS.
Over longer periods the effect is large: £1,000 in 2000 would need £1,982 today, and even £1,000 in 2021 would need £1,291.
UK inflation rate by year
The CPI inflation rate for each calendar year. The recent peak was 11.1% in October 2022, the highest in over 40 years according to the ONS.
| Year | CPI inflation |
|---|---|
| 2026, latest month | 3.5% |
| 2025 | 3.4% |
| 2024 | 2.5% |
| 2023 | 7.3% |
| 2022 | 9.1% |
| 2021 | 2.6% |
| 2020 | 0.9% |
| 2019 | 1.8% |
| 2018 | 2.5% |
| 2017 | 2.7% |
| 2016 | 0.7% |
Source: ONS, series D7G7. Yearly figures are the ONS annual rates.
CPI, CPIH and RPI explained
- CPI, the consumer prices index, is the headline rate and the one the Bank of England targets at 2%. It was 3.5% in September 2026. This calculator uses it.
- CPIH adds owner occupiers’ housing costs and council tax. The ONS treats it as its most complete measure. It was 3.6%.
- RPI is an older measure that usually runs higher than CPI. It is no longer a National Statistic but is still used in some contracts and older index-linked products. It was 3.9% in September 2026.
How the calculator works
The calculator adds interest once a year at the rate you enter and takes off tax where it applies, then divides by how much prices have risen to show the result in today’s money.
- Rates stay the same. Real savings rates and inflation change, so treat the result as a guide.
- Tax uses your allowance. In a savings account, interest above your Personal Savings Allowance is taxed at your band’s rate: 2026 to 2027 rates in year one, and the higher rates from April 2027 after that. We assume you have no other savings interest.
- Best Cash ISA. We pick the Cash ISA in our table that would leave you with the most over your time frame, using its first-year rate and then its rate after any bonus.
- Top savings account. The best easy access rate from banks and building societies in our weekly check, taxed like any savings account.
- Investing example. A steady return after fees, tax-free in a Stocks and Shares ISA. Real returns rise and fall, and can be negative.
Inflation and Bank Rate come straight from the ONS and the Bank of England and update when they publish new figures:
- CPI and CPIH inflation: ONS: Consumer price inflation, UK, September 2026
- Monthly CPI rates and index: ONS: CPI annual rate (series D7G7) and CPI index (D7BT)
- Bank Rate: Bank of England: Bank Rate
- Inflation outlook: Bank of England: Monetary Policy Summary and minutes, November 2026
- Personal Savings Allowance: GOV.UK: Tax on savings interest
- Savings tax rates from April 2027: HM Treasury: Budget 2026 overview of tax legislation and rates
Frequently asked questions
What is the current UK inflation rate?
CPI inflation was 3.5% in the 12 months to September 2026, up from 3.1% the month before, according to the Office for National Statistics. CPIH, which also includes owner occupiers’ housing costs, was 3.6%. The Bank of England’s target is 2%.
When is the next inflation figure published?
The ONS publishes consumer price inflation once a month, usually on a Wednesday in the middle of the month. The next figure is due on 18 November 2026. This page updates automatically when it is published.
What interest rate do I need to beat inflation?
More than the inflation rate after any tax, so above 3.5% right now. In a Cash ISA there is no tax, so the rate itself has to beat inflation. Outside an ISA, interest above your Personal Savings Allowance is taxed: with £50,000 saved, a higher rate taxpayer would need about 5.46% to keep up once the new tax rates start in April 2027.
Does a Cash ISA beat inflation?
Some do. Several Cash ISAs in our table pay more than 3.5% in their first year, but many of the highest rates include a bonus that ends after 12 months. Check the rate you will get once any bonus ends, because that is what decides whether your savings keep growing in real terms.
Do I pay tax on savings interest?
Only above your Personal Savings Allowance: £1,000 of interest a year for basic rate taxpayers, £500 for higher rate and nothing for additional rate. Interest above that is taxed at 20%, 40% or 45% in 2026 to 2027, rising to 24%, 44% and 49% from 6 April 2027. Interest in a Cash ISA is always tax-free.
What is a real interest rate?
It is what your savings earn after inflation. A 4.5% rate with inflation at 3.5% gives a real return of about 1.0%, so your money buys a little more each year. A rate below inflation gives a negative real return, even though your balance still goes up.
Should I invest instead of saving to beat inflation?
It depends on when you need the money. Cash suits money you may need in the next few years, because its value does not fall. Investing in a Stocks and Shares ISA gives your money the chance to grow faster than inflation over five years or more, but values rise and fall and you could get back less than you put in.
Is my money safe in a Cash ISA?
Cash ISAs held as bank or building society deposits are protected by the FSCS up to £120,000 per person, per banking licence. Some Cash ISAs from investing platforms hold your money in money market funds instead. Those are investments, covered differently, and their value can fall.