The frozen Savings Allowance combined with rising interest rates will push over
one million taxpayers into paying tax on their savings this tax year, according
to research by investment platform AJ Bell.
In the 2023/24 tax year it is estimated that over 2.7 million individuals will
pay tax on interest, up by a million in a year.
This year's predicted total includes nearly 1.4 million basic rate taxpayers, a
figure which has quadrupled in just four years, AJ Bell's research found.
Individuals pay tax on interest they earn on savings that exceeds the personal
Savings Allowance, which currently stands at £1,000 for basic rate taxpayers and
£500 for higher rate taxpayers. Additional rate taxpayers get no exemption and
pay tax on all interest they receive.
Laura Suter, Head of Personal Finance at AJ Bell, said:
'These figures highlight just how many taxpayers are facing a tax bill for
their savings interest this year – a huge leap when compared to last year.
The combination of higher interest rates and people having shunned ISA
accounts in recent years means that the number paying tax on their savings
has more than tripled in the past four years.
'Rising rates and a frozen personal Savings Allowance means some individuals
are being taxed despite having relatively modest pots of cash set aside for
a rainy day. To add insult to injury, because inflation is so high, they
aren't even making a real return on their money – yet they are still being
taxed.'