After-tax future value of an investment when returns are taxed annually.

50,000 at 7% for 25 years grows to 271,372 pre-tax. At a 25% annual tax on returns, it grows to 179,689 instead — a 91,683 tax drag. That's why tax-advantaged wrappers (tax-advantaged savings account, pension) matter so much for long-horizon investing: in a wrapper, the full compound value is preserved.

How to use it

Enter starting balance, expected gross annual return, your effective tax rate on investment returns (this varies by income band and asset type), and the horizon.

What the result means

Primary is after-tax future value. Secondary shows pre-tax FV, total tax drag, and effective after-tax return rate. The gap compounds — each taxed dollar loses its future compound contribution too, not just the dollar itself.

Comparing with tax-advantaged accounts

For the same starting balance and gross return, a tax-wrapped account (tax-advantaged savings account, pension) gives the pre-tax number; a taxable account gives the after-tax number. The difference is often 20-40% over long horizons — a huge reason to fully use allowances first.

Quick example

With starting balance of 50,000 and gross annual return of 7% (plus effective tax rate of 25% and years of 25 years), the result is 179,689.47. Change any figure and watch the output shift — it's often more useful to see the pattern than to memorise the formula.

Which inputs matter most

You enter Starting Balance, Gross Annual Return, Effective Tax Rate, and Years. The rate and the time horizon usually dominate — compounding means a small change in either reshapes the final figure more than a similar shift in contribution size. Test this by doubling one input at a time.

What's happening under the hood

Models tax as a direct reduction to the annual return rate: effective rate = gross × (1 − tax rate). Compounds at the effective rate. Simplification — real tax drag varies with asset type (dividends vs capital gains) and realisation timing. For buy-and-hold assets that defer capital gains tax, actual drag is lower than this model shows. The formula is listed in full below. If the number looks off, you can retrace the calculation by hand — that's the point of showing the working.

Why investors run this

Most people's intuition for compounding is wrong — not because the math is hard, but because linear thinking doesn't account for curves. Running numbers through a calculator like this one is the cheapest way to recalibrate that intuition before making an irreversible decision about contribution rate, asset mix, or retirement age.

What this doesn't capture

Steady-rate math ignores real-world volatility. Actual returns are lumpy; sequence-of-returns risk matters most in drawdown; fees and taxes drag on compound growth; and behaviour changes in drawdowns can reduce outcomes below the projection. Treat the number as one scenario, not a forecast.