Hundreds of thousands of people with savings accounts are facing tax bills of £5,000 or more, according to new data. The number of savers hit with such charges has nearly tripled in just four years, rising from 52,700 in 2022-23 to an expected 144,000 in 2026-27.
Sharp Rise in Tax Liability
A Freedom of Information request obtained by Paragon Bank reveals that 144,000 individuals are projected to pay at least £5,000 in tax on savings income in the current tax year. This represents a 173% increase compared to the 52,700 savers affected in 2022-23. The figures highlight how rising savings balances and sustained interest rates are pushing more people into higher tax brackets.
In 2023-24, the number more than doubled to 117,000, before rising again to 133,000 in 2024-25 and 137,000 in 2025-26. HMRC now forecasts that 144,000 individuals will face substantial tax bills on interest earned outside tax-free accounts such as ISAs.
Large Balances Outside Tax-Free Accounts
Separate analysis from data provider CACI shows the scale of cash savings held outside tax-efficient wrappers. It estimates that around 1.1 million instant-access adult non-ISA savings accounts hold balances of £100,000 or more, collectively amounting to over £260.7 billion. A significant portion of this money is generating substantial interest, with some savers earning hundreds or even thousands of pounds in taxable returns each year.
Despite these trends, the Personal Savings Allowance thresholds have remained unchanged. Basic-rate taxpayers can earn up to £1,000 in interest tax-free, higher-rate taxpayers have a £500 allowance, and additional-rate taxpayers receive no exemption, being taxed on all interest earned outside tax-free accounts.
Expert Advice on Structuring Savings
Andrew Wright, head of savings at Paragon Bank, noted that savings tax is now affecting a much wider group. “These figures show that tax on savings is no longer an issue affecting just a small number of people,” he said. “As balances have grown and rates have remained relatively high, far more savers are now finding themselves with substantial tax bills on their interest.”
Wright advised savers to review their savings regularly, check the rates they are earning, and make use of tax-efficient options like ISAs. “Reviewing your savings regularly, checking the rate you are earning, and making use of tax-efficient options where appropriate can help ensure more of your return stays in your pocket,” he added.
The data underscores the importance of careful financial planning, particularly for those holding large balances in standard savings accounts.
