Inflation Calculator
Calculate the effect of inflation on purchasing power. See what money was worth in the past or what it will be worth in the future
Amount in the past year
UK CPI average is around 2-3% historically. Current target is 2%.
What year was the amount worth £1000?
Equivalent Value Today
£1,194.05
£1000.00 in 2020 is equivalent to £1194.05 today (2026)
Total Inflation Effect
+19.41%
Purchasing Power Change
-16.25%
Year-by-Year Breakdown
| Year | Value |
|---|---|
| 2020 | £1,000.00 |
| 2021 | £1,030.00 |
| 2022 | £1,060.90 |
| 2023 | £1,092.73 |
| 2024 | £1,125.51 |
| 2025 | £1,159.27 |
| 2026 | £1,194.05 |
How This Works:
- Uses the compound inflation formula: Future Value = Present Value × (1 + inflation rate)^years
- Inflation rate should be the average annual rate for the period
- UK inflation varies year-to-year — use average rates for best estimates
- This is a simplified calculation that doesn't account for varying inflation across years
How Inflation Erodes Purchasing Power Over Time
Inflation works as compound erosion. £1,000 sitting in a non-interest-paying account during 5% inflation drops to roughly £950 of real spending power after one year, £902 after two, and £783 after five. Run that across 20 years at 3% (the Bank of England's long-term target is 2%, but actual UK CPI has averaged closer to 3% since 2000) and £1,000 today buys what £554 buys now.
The historical mode of the calculator answers "what was £X in year Y worth in today's money?" - useful for understanding house prices, salaries or the price of a pint across decades. The future mode answers "what will £X be worth in N years?" - useful for retirement planning. Both run the same compound formula: future value = present value x (1 + rate)^years.
What This Means for Cash Savings
If your savings account pays 4.5% AER and inflation runs at 3%, your real return is roughly 1.5% per year, not 4.5%. A £20,000 emergency fund earns £900 in nominal interest but only £300 in real purchasing power after inflation eats its share. That is one reason the [Compound Interest Calculator](/compound-interest-calculator) lets you toggle inflation adjustment on - the nominal-only number is misleading.
The classic British example is the £85,000 FSCS protection limit. It was set in 2010 and has not moved since. Adjusted for cumulative UK inflation across 16 years, the real protection is now closer to £56,000 in 2010 spending power. Pension thresholds, tax bands and benefit rates work the same way: when they freeze, real value declines silently every year. The personal allowance has been £12,570 since 2021/22; in 2026 money that frozen allowance is worth roughly £10,400 of 2021 spending power.
What £10,000 in 2010 Bought in Each Following Year (3% Annual Inflation)
| Year | Equivalent Today | Cumulative Loss |
|---|---|---|
| 2010 | £10,000 | 0% |
| 2015 | £11,593 | 13.7% |
| 2020 | £13,439 | 25.6% |
| 2024 | £15,126 | 33.9% |
| 2026 | £16,047 | 37.7% |
Frequently Asked Questions
What inflation rate should I use?
For UK calculations, 2.5% to 3.5% is a reasonable long-run estimate. The Bank of England targets 2% but actual CPI has averaged around 3% across the last 25 years, with sharp spikes (over 11% in late 2022) and quieter periods. Use the lower end for conservative planning and the higher end if you want a stress test. The Office for National Statistics publishes historical CPI back to 1989.
Why do inflation calculators give different answers?
Different rate assumptions and different inflation indices. CPI (Consumer Prices Index) is what the Bank of England targets; RPI (Retail Prices Index) typically runs about 1 percentage point higher because it includes housing costs differently. The ONS no longer publishes RPI as a national statistic, but some legacy products (rail fares, student loans) still index to it. Pick the index that matches your purpose and stay consistent.
Does inflation affect my pension?
Most workplace and personal pensions invest in real assets (equities, bonds, property) which historically beat inflation over decades, but year-to-year volatility is high. The State Pension is uprated by the triple lock (the highest of inflation, earnings growth or 2.5%), which usually keeps it ahead of inflation. Defined-benefit pensions vary - check whether yours uprates by CPI or RPI in payment, because that can change retirement income by tens of thousands over a long retirement.
What happened to UK inflation in 2022 to 2023?
CPI peaked at 11.1% in October 2022, the highest since 1981. The spike was driven primarily by energy prices following the Russia-Ukraine war, food prices, and post-pandemic supply chain issues. By late 2024 it was back near the 2% target, but the cumulative price level is now permanently higher; prices do not fall back when inflation slows, they just rise more slowly. A £100 weekly shop in 2021 still costs about £125 today, and that gap is locked in.
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