Real Return Calculator (After Inflation)

Calculate the real return on investments after accounting for inflation. See purchasing power impact.

Last updated: April 2026 · Source: Bank of England

£

Real Return (after inflation)

3.88%

Nominal: 7.00% - Inflation: 3.00%

Nominal Value

£196,715.14

Real Value (today's £)

£146,374.54

Lost to Inflation

£50,340.60

Disclaimer

This calculator is provided for informational purposes only and should not be considered as financial or tax advice. All calculations are performed locally in your browser — no personal data is collected or sent to our servers. Rates and thresholds are sourced from HMRC and GOV.UK and are updated for the current tax year. Always verify results with HMRC or consult a qualified professional before making financial decisions.

How It Works

The real return strips inflation from nominal investment returns to reveal actual purchasing power growth. The precise formula is: Real Return = ((1 + Nominal Return) / (1 + Inflation Rate)) - 1. This multiplicative method is more accurate than simply subtracting inflation from the nominal rate, especially when rates are high. At 8% nominal growth and 4% inflation, the real return is (1.08/1.04) - 1 = 3.85%, not 4%.

UK inflation is measured primarily by CPI (Consumer Prices Index) and CPIH (CPI including owner occupiers' housing costs). The Bank of England targets 2% CPI inflation. Historical UK CPI has averaged approximately 2.5-3% over the past two decades, with spikes to 11.1% in October 2022. The calculator allows custom inflation assumptions or uses the BoE target rate for forward projections.

Purchasing power erosion accelerates over time. At 3% annual inflation, £100,000 buys only £74,400 worth of today's goods after 10 years, £55,400 after 20 years, and £41,200 after 30 years. For retirement planning over 25-30 years, failing to account for inflation can leave you with half the expected spending power. The calculator shows the nominal portfolio value alongside its inflation-adjusted equivalent at 10, 20, and 30-year intervals.

Real return on a portfolio averaging 7% nominal over 25 years

  1. Nominal annual return: 7%
  2. Assumed CPI inflation: 2.5%
  3. Real annual return: (1.07 / 1.025) - 1 = 4.39%
  4. Nominal value of £100,000 after 25 years at 7%: £542,743
  5. Real purchasing power of that £542,743 at 2.5% inflation: £292,400 in today's money

Source: Bank of England

Frequently Asked Questions

What does the Real Return Calculator (After Inflation) do?
Calculate the real return on investments after accounting for inflation. See purchasing power impact. All calculations are performed in your browser using official UK rates and thresholds.
Is this calculator suitable for financial decisions?
This calculator provides estimates for guidance only. Investment returns are not guaranteed and your capital is at risk. Consider seeking independent financial advice before making investment decisions.
Are ISA contributions tax-free?
Yes. The annual ISA allowance for 2025/26 is £20,000. Any interest, dividends or capital gains within an ISA are completely tax-free.