Millions of savers across the UK are being hit with unexpected tax bills as rising interest rates push their earnings over the personal savings allowance. HM Revenue & Customs (HMRC) estimates that over 1.2 million people will owe tax on their savings interest this year – a sharp increase from previous years.
Why Are More Savers Being Taxed?
With the Bank of England raising interest rates to combat inflation, savings accounts are finally offering better returns. However, this also means many savers are exceeding the £1,000 (or £500 for higher-rate taxpayers) tax-free allowance for savings interest.
Who Is Most at Risk?
The following groups are most likely to be affected:
- Basic-rate taxpayers earning over £1,000 in savings interest
- Higher-rate taxpayers earning over £500 in savings interest
- Fixed-rate savers who locked in higher rates before recent hikes
What Can You Do?
If you're concerned about a potential tax bill, consider these steps:
- Check your total savings interest across all accounts
- Consider moving money into tax-efficient ISAs
- Spread savings between spouses to use both allowances
- Review whether you need to complete a self-assessment tax return
Experts warn that many savers may be unaware they owe tax until HMRC contacts them, potentially leading to surprise demands for payment.
