Inflation Calculator

The Consumer Prices Index (CPI) tracks the average price change of a weighted basket of around 700 goods and services purchased by UK households. The Office for National Statistics collects approximately 180,000 price quotes each month from shops, online retailers and service providers across the country. Each item's weight reflects its share of total household spending, updated annually from the Living Costs and Food Survey, so the basket shifts as spending habits change.

To convert a historical amount to today's prices, the calculator divides the current CPI index value by the historical index value, then multiplies by the original sum. The CPI index stood at 68.0 in January 2000 and approximately 136.0 in early 2026, giving a ratio of 2.0. That means £100 in January 2000 had roughly the same purchasing power as £200 in 2026. The same arithmetic runs forwards as well, projecting what a sum held today would be worth at a chosen rate.

CPI differs from the older Retail Prices Index (RPI) in several ways. It excludes mortgage interest payments and council tax, uses a geometric rather than arithmetic mean for averaging prices, and covers a broader population including foreign visitors' spending. CPIH extends CPI by adding owner-occupiers' housing costs and has been the ONS preferred measure since 2017. RPI survives for index-linked gilts and some pension uprating, and typically runs 0.5% to 1% above CPI. Both appear around the 15th of each month, and CPI has been the main measure since 2003. The calculator defaults to CPI as it is the UK government's preferred inflation measure and the Bank of England's target index.

The Bank of England targets 2% CPI, and the record shows how rarely inflation sits exactly there. The 1990s averaged around 3%, the 2000s about 2.5% and the 2010s roughly 1.8%, before the 2020 to 2024 period spiked to 11% as COVID supply chains and the Ukraine energy crisis collided. The peak was 11.1% in October 2022, the highest reading in 41 years. CPI averaged 2.5% in 2024 and 3.4% in 2025, and through 2026 it has run between 2.6% and 3.3% (3.1% in August). The Bank base rate has been 3.75% since December 2025, down from a 5.25% peak in 2023.

Compounding is what does the damage. At 3% a year purchasing power halves in 24 years, at 5% in 14 years and at 10% in 7. £100,000 saved in 2000 was worth about £49,000 in 2024 terms, and £100,000 put aside in 1980 had fallen to roughly £21,000 by the same point. Retirement planning runs the arithmetic the other way, so an income of £30k a year today needs about £55k in 20 years at 3% inflation to buy the same life. The triple lock, which uprates the State Pension by the highest of earnings, CPI or 2.5%, exists to hold that line for pensioners.

Real return is nominal return minus inflation, and it is the only figure worth planning on. A 4% savings rate against 3% inflation is a 1% real return, while a 7% investment return against the same 3% leaves 4%. Cash sitting in a low-interest account while inflation runs above 5% loses 4% to 5% of its purchasing power every year. Long-term pension and mortgage projections should therefore be quoted in real terms, and an annuity bought without inflation protection can shed 30% to 50% of its real value across a 20-year retirement.

Different assets handle inflation differently. The UK FTSE All-Share has averaged a 7% real return since 1900, with long-run equity returns generally in the 4% to 6% range, which is why equities are the usual answer over long horizons. Property has historically returned 3% to 5% in real terms, though with wide regional variation, while bonds sit at 0% to 2% and cash ranges from minus 1% to plus 1%. Gold delivers no real return over the long run but hedges currency debasement and crisis. Index-linked gilts are built to track inflation directly, and NS&I Index-Linked Savings Certificates are closed to new investors. Crypto has too short a history to be called an inflation hedge.