Inflation Calculator UK

Inflation measures the rate at which the general level of prices for goods and services rises over time, eroding the purchasing power of money. The UK's primary inflation measure is the Consumer Prices Index (CPI), which tracks a basket of around 700 goods and services. The Bank of England targets CPI at 2% per year — when it deviates significantly, interest rates are adjusted to bring it back in line.

Understanding inflation is crucial for any financial planning. If inflation averages 3%, £100 today will only buy £74 worth of goods in 10 years. This is why cash savings earning below inflation are actually losing value in real terms. The distinction between nominal returns (the headline figure) and real returns (adjusted for inflation) is critical — a savings account paying 4% when inflation is 5% gives a real return of minus 1%. Your money grows in number but shrinks in purchasing power.

How to Use This Calculator

1. Enter an amount in today's money
2. Set the assumed annual inflation rate (or use the current CPI figure)
3. Choose the number of years into the future (or past for historical comparison)
4. View the equivalent purchasing power — what that amount will buy in future or what past amounts are worth today
5. Use this to plan retirement income needs, set savings targets, or evaluate pay rises

Key Facts

The UK experienced CPI inflation of 11.1% in October 2022 — the highest in 41 years. RPI (Retail Prices Index) typically runs 0.5-1% higher than CPI and is still used for student loan interest, rail fares, and some pension increases. A common retirement planning mistake is failing to inflation-adjust: needing £30,000/year today means needing approximately £54,000/year in 20 years at 3% inflation. Index-linked gilts and inflation-linked annuities provide protection but at a cost of lower initial returns.