Six million people with savings accounts face ‘shock’ tax bill from HMRC

The number of UK households at risk of a “shock” tax bill has soared – DOUBLE. Six million savings accounts are now “at risk” of a surprise tax bill, new data suggests, in a brutal blow to family finances as the Cost of Living crisis continues across the country.

Shawbrook, after crunching the numbers from CACI data, found that more than six million savings accounts in April could be in breach of the £1,000 personal savings allowance (PSA) for standard rate taxpayers, putting them at risk of tax.

Adam Thrower, head of savings at Shawbrook, commented: “For many years, savings tax was an afterthought due to low rates, but with high interest rates and frozen limits, it becomes a bigger concern.

READ MORE Jay Slater’s mum tells ‘how’ and ‘has questions’ as body found after 29 days

“Savers must now consider tax and the impact it may have on their overall returns as a central issue when deciding where to put their hard-earned money.” Mr Thrower also continued and highlighted: “Fortunately, through ISAs, people can save £20,000 per person tax-free, which remains the number one way to save tax efficiently.”

Mr Thrower continued: “As we approach the Bank of England’s next decision, savers may want to consider fixed-term ISAs, locking in high rates for another year. With Bank of England interest rates likely to peak, there is growing anticipation of the first cut for some time, and when it does arrive, this could reduce the interest rates offered on savings.

“Locking up now can secure higher interest rates for the longer term, and using ISAs to do so can keep your money free from any surprise tax bills.” If you’re a UK basic rate taxpayer, up to £1,000 of interest on your savings income is now tax-free. And if you’re a higher rate taxpayer, up to £500 is tax-free.

Your personal savings allowance (PSA) is the total amount of interest you can earn each year on all your bank accounts (except ISAs) without paying tax.