Frozen thresholds and fatter savings rates mean a record 4.5 million people will now pay tax on their nest eggs.
N/A (LSE: N/A) HMRC has quietly torn up its own sums on savings tax, revealing that a record 4.5 million people are now expected to pay income tax on their savings interest this year, some 1.7 million more than it had previously forecast. The revision, driven by updated income data and methodology, pushes the estimate up from an earlier projection of 2.7 million taxpayers caught by the levy.
The jump has nothing to do with a sudden windfall for savers and everything to do with the mechanics of frozen income-tax thresholds colliding with higher interest rates. As savings rates have climbed, more account holders have earned enough interest to breach their Personal Savings Allowance, while wage growth has quietly nudged many into higher tax bands, shrinking or wiping out that allowance altogether.
Under current rules, basic-rate taxpayers can earn £1,000 of savings interest tax-free, a figure that halves to £500 for higher-rate taxpayers, while additional-rate taxpayers get no allowance at all. HMRC now expects to pocket around £8.4 billion in tax on savings interest during 2026-27, a haul it expects to keep growing as more savers are dragged over the threshold.
The squeeze is set to tighten further from April, when tax rates on savings held outside ISAs are due to rise by two percentage points across the income-tax bands, alongside separate changes to ISA rules that will alter how much cash savers can shelter from the taxman.
Financial advisers are urging anyone sitting on sizeable cash balances outside tax-free wrappers to review where their money is held and make full use of their ISA allowance before the new rules land, warning that inertia is likely to prove costly as more households are swept into the tax net.
This report is based on N/A’s announcement and coverage by Share Talk. Company announcements can be tracked via London Stock Exchange RNS and Investegate, and the full results calendar is worth watching for the next update.
This article is for general information only and does not constitute investment advice or a recommendation to buy or sell any security. Photo: Towfiqu barbhuiya on Unsplash.
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