The number of individuals getting taxed on their savings interest has risen sharply because of rising interest rates and frozen allowances.
More than 2.7 million savers are expected to pay tax on their savings income in 2026-27, up from 2.2 million in 2023-24, according to official statistics.
Savers pay income tax at their marginal rate on interest earned over the personal savings allowance, worth £1,000 for basic-rate taxpayers and £500 for higher-rate taxpayers. Additional-rate taxpayers, earning more than £125,140, get no personal savings allowance.
The allowance has not risen since it was introduced in April 2016.
A higher earner would need to hold £325,000 outside of an Isa, in an account paying 4pc interest, to incur a £5,000 tax bill. Meanwhile, an additional-rate taxpayer would need £277,500.
It comes after a Telegraph investigation revealed that HMRC was clawing back tax on savings interest that either did not exist or was shielded in an Isa, after banks were forced to hand over details of their customers’ accounts.
It found that taxpayers had been wrongly billed to the tune of thousands of pounds and had their tax codes adjusted to repay the sum.
Andrew Wright, of Paragon Bank, which obtained the statistics, said: “These figures show that tax on savings is no longer an issue affecting just a small number of people.
“As balances have grown and rates have remained relatively high, far more savers are now finding themselves with substantial tax bills on their interest.”
