More than two million people aged 65 and over are forecast to pay tax on their savings income in the 2026/27 tax year, according to new analysis from Paragon Bank.
A Freedom of Information request submitted by Paragon to HMRC shows that 2.1 million people in this age group are expected to face an Income Tax liability on their savings income, more than four times the 517,000 recorded in 2022/23.
Tax liability reaches £3.34 billion
The total tax liability on savings income among people aged 65 and over is forecast to reach £3.34 billion in 2026/27, compared with £795 million four years earlier.
Those aged 65 and over are expected to account for almost half, 47%, of all taxpayers with an Income Tax liability on savings income in 2026/27, up from 42% in 2022/23.
ISA allowance change
The figures highlight the growing number of retirement-age savers who could face tax on the interest generated by their savings.
From the 2027/28 tax year, savers aged 65 or above will retain their full £20,000 cash ISA allowance, highlighting the opportunity for these individuals to limit their tax exposure. Savers aged 64 and under will only be able to save £12,000 in cash into an ISA.
Expert comment
Andrew Wright, head of savings at Paragon Bank, said: “Millions of older savers are being pulled into the tax net, putting more of their retirement savings at risk, with four times as many savers aged 65 plus incurring a tax bill on their interest than just four years ago.
“With savings often providing vital financial security later in life, it is important to regularly review where your money is held. Making full use of your ISA allowance can help protect more of your hard-earned interest from tax and those aged 65+ have the benefit of retaining the full £20,000 cash ISA allowance from next tax year.”
