Warning for savers as 300,000 more people set to pay tax on their savings
More people are paying tax on their savings. Here’s why
- About 300,000 more people are now liable to pay tax on their savings interest compared to five years ago, with the number rising from 3.06 million in 2020-21 to 3.35 million this year.
- These figures, obtained by Nottingham Building Society, highlight a "growing and often hidden tax burden on ordinary savers", primarily driven by fiscal drag due to frozen tax thresholds and inflation.
- While government rules allow for tax-free personal allowances and a "savers’ allowance" of up to £5,000 interest, experts say the system is complex and emphasise the value of tax-efficient Individual Savings Accounts (ISAs).
- Nottingham Building Society is urging the government to simplify and strengthen cash ISAs, rather than introducing new barriers.
- A Treasury spokesperson affirmed the government's commitment to protecting the £20,000 tax-free yearly ISA limit, ensuring most people continue to pay no tax on their savings.