More tax on savings

Millions now face having to pay tax on savings interest

Soaring interest rates have resulted in a significant increase in the number of savings accounts that have earned enough interest to warrant a tax bill. Last year, 3.94m accounts met this criteria, up from 3.3m in April and 257,000 in September 2022. Basic-rate taxpayers can earn up to £1,000 tax-free, while higher-rate taxpayers can earn up to £500. Those who exceed their allowance may need to file a tax return and pay tax on the difference. The rising interest rates, coupled with frozen income tax thresholds, have pushed more people into paying tax on their savings. Anna Bowes from the Savings Champion website said: “The personal savings allowance has quite simply been ignored since inception. And the £20,000 annual Isa allowance has also not been increased for seven years. Let's not be coy, this is yet another stealth tax to add to the mix.”