Financial Glossary
APY (Annual Percentage Yield)
APY measures the total amount of interest earned on a deposit account over one year, taking into account the effect of compound interest. Unlike simple interest rates, APY reflects how often interest compounds (daily, monthly, quarterly), making it the most accurate measure of an account's earning potential. Higher compounding frequency results in higher APY.
Example
A savings account offering 4.50% interest compounded monthly has an APY of 4.59%. This means $10,000 deposited would grow to $10,459 after one year. The same 4.50% rate compounded daily would yield an APY of 4.60%. Always compare APYs rather than interest rates when evaluating savings accounts.
Frequently Asked Questions
What is the difference between APY and APR?
APY applies to deposit accounts (savings, CDs) and measures what you earn. APR applies to loans and measures what you pay. APY accounts for compound interest, while APR accounts for fees. Both are annualized rates that help consumers compare financial products.
How does compounding frequency affect APY?
More frequent compounding increases APY. Daily compounding yields a higher APY than monthly compounding at the same nominal interest rate. The difference is small for most accounts but becomes significant over longer periods and larger balances.
Related Resources
Official Sources
United Kingdom calculators use data from the following official government agencies:
- HM Revenue & Customs (HMRC) — Income tax bands, National Insurance rates, and pension allowances.
- Office for National Statistics (ONS) — UK earnings data, CPI inflation, and economic statistics.
- MoneyHelper (UK) — Pension guidance, mortgage advice, and financial literacy resources.
Methodology
Our UK calculators use tax bands, National Insurance rates, and contribution limits published by HMRC. Salary and economic data comes from the Office for National Statistics (ONS). Mortgage calculations use average UK interest rates and may vary by lender and individual circumstances. All figures are for educational purposes.
Data Sources
All tax brackets, contribution rates, and economic data used in our calculators are sourced from the official government publications listed above. Rates are updated at least annually to reflect the latest tax year and regulatory changes. Users should verify critical figures with official sources or qualified professionals.
Last updated: June 2026. Information may change; always verify with official sources.
Last Updated: June 2026 — Reviewed Against Official Sources