Purchasing Power
UK Inflation
Calculator
BoE Target
2.0%
Historic Avg
~2.8%
Find out how inflation erodes the purchasing power of your money over time. Enter any amount in pounds, set an annual inflation rate and choose a time period. Switch between future value mode to see what your money will be worth, or past value mode to find what an amount was worth years ago. Based on the compound inflation formula used alongside the Consumer Prices Index (CPI).
Inflation Details
Adjusted Value
£0
Purchasing Power Lost
£0
Cumulative Inflation
0%
Equivalent Amount
£0
How the inflation calculator works
Start by entering an amount in pounds. This can be any sum from £1 to £1,000,000 — a salary, a savings balance, the cost of a purchase or any other figure you want to adjust for inflation.
Next, set the annual inflation rate. The default is 3.0%, which is close to the long-term UK historical average. You can adjust this to reflect current conditions, use the Bank of England's 2% target, or model higher-inflation scenarios up to 20%.
Choose how many years to project, from 1 to 50. In Future Value mode, the calculator shows what your amount will be worth after that many years of inflation — meaning how much more you would need to buy the same goods and services. In Past Value mode, it shows what your current amount was equivalent to in today's purchasing power that many years ago.
The formula uses compound inflation: for future value, the adjusted amount equals the original multiplied by (1 + rate) raised to the number of years. For past value, it divides instead. Results update instantly as you change any input.
What you need to know about inflation in the UK
UK inflation is measured primarily through the Consumer Prices Index (CPI), published monthly by the Office for National Statistics (ONS). CPI tracks the average change in prices paid by consumers for a representative basket of goods and services, including housing, food, transport, clothing and recreation.
The Bank of England has a 2% annual CPI inflation target, set by the Government. The Monetary Policy Committee (MPC) meets eight times a year to set the base interest rate, raising it when inflation is too high and cutting it when inflation falls below target or the economy needs stimulus.
The UK also publishes the Retail Prices Index (RPI), an older measure that includes mortgage interest payments and council tax. RPI typically runs 0.5-1% higher than CPI. Although the ONS no longer classifies RPI as a national statistic, it is still used for student loan interest, rail fare increases and some index-linked gilts.
Historically, UK inflation has averaged roughly 2.5-3.0% per year since the early 1990s when the Bank of England gained operational independence. The 1970s saw inflation exceed 20%, driven by oil shocks and wage-price spirals. Post-2020, CPI surged above 10% before gradually easing back towards target.
Understanding inflation is essential for financial planning. Savings accounts earning less than the inflation rate actually lose purchasing power over time. Investments, pensions and salary negotiations should all account for inflation to maintain your standard of living. Even at a modest 3% rate, prices roughly double every 24 years.
Frequently asked questions
What is inflation and how does it affect my money?
Inflation is the general rise in prices over time, which reduces the purchasing power of your money. If inflation averages 3% per year, something that costs £100 today would cost about £134 in ten years. Use the inflation calculator above to see exactly how much your pounds could lose in value.
What is the Bank of England's target inflation rate?
The Bank of England has a 2% annual inflation target, set by the Government and measured by the Consumer Prices Index (CPI). The Monetary Policy Committee adjusts the base interest rate to keep CPI inflation close to this target. When inflation runs too high, rates rise to cool spending.
How do I calculate inflation-adjusted pounds?
To find the future value of money after inflation, multiply the amount by (1 + inflation rate) raised to the number of years. For example, £1,000 at 3% inflation over 10 years equals £1,000 x 1.03^10 = £1,343.92. To find the past value, divide instead of multiply. The calculator above handles both directions instantly.
What is the difference between CPI and RPI?
CPI (Consumer Prices Index) is the Government's official inflation measure and the Bank of England's target. RPI (Retail Prices Index) includes mortgage interest payments and tends to run 0.5-1% higher than CPI. RPI is still used for some purposes like student loan interest and rail fare increases, but the ONS no longer classifies it as a national statistic.
What has the average UK inflation rate been historically?
Since 1989, UK CPI inflation has averaged roughly 2.5-3.0% per year. However, rates have varied widely. The 1970s saw inflation above 20%, whilst the 2010s saw periods below 1%. Post-2020 inflation surged above 10% before gradually returning towards the Bank of England's 2% target.
How can I protect my savings from inflation?
Options include investing in assets that historically outpace inflation, such as equities, property and index-linked gilts. ISAs with competitive interest rates and NS&I Index-Linked Savings Certificates can also help. The key is ensuring your money grows faster than the inflation rate, otherwise your purchasing power declines over time.