1. What is the Daily Interest Calculation?

The daily interest calculation determines how much interest a UK savings account earns each day based on the principal amount and annual interest rate. This formula is commonly used by UK financial institutions to calculate daily accrued interest.

2. How Does the Calculator Work?

The calculator uses the daily interest formula:

Where:

• \( P \) — Principal amount (GBP)
• \( R \) — Annual interest rate (decimal)
• \( I \) — Daily interest amount (GBP)

Explanation: The formula divides the annual interest by 365 days to calculate the daily interest earned on a savings account.

3. Importance of Daily Interest Calculation

Details: Understanding daily interest helps savers track their earnings, compare different savings products, and plan their financial goals more effectively.

4. Using the Calculator

Tips: Enter the principal amount in GBP and the annual interest rate as a decimal (e.g., 0.05 for 5%). Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why divide by 365 instead of 360?
A: UK savings accounts typically use 365 days per year for interest calculations, following the actual calendar year.

Q2: How is the annual interest rate converted to decimal?
A: Divide the percentage rate by 100 (e.g., 3.5% becomes 0.035).

Q3: Does this calculation account for compound interest?
A: This calculates simple daily interest. For compound interest, the calculation would be more complex as it includes interest on previously earned interest.

Q4: Are there any fees or taxes considered in this calculation?
A: This calculation shows gross daily interest before any fees or taxes. Actual net interest may be lower after applicable charges and taxes.

Q5: Is this calculation specific to UK savings accounts?
A: Yes, this formula follows the standard UK banking practice of using 365 days for daily interest calculations.