Yorkshire Building Society has issued a stark warning that millions of savers could be caught in an HMRC tax raid, as the personal savings allowance remains frozen for a decade. The number of savings accounts generating more than £1,000 in annual interest has surged by 1,047 per cent since 2018, according to the building society.
5.3 million accounts at risk by 2026
The society projects that 5.3 million non-ISA savings accounts will generate more than £1,000 in annual interest by January 2026, compared with just 462,000 eight years earlier. This means even basic-rate taxpayers earning between £12,570 and £50,270 could be drawn into the tax net.
The personal savings allowance, which has not been updated for a decade, depends on Income Tax bands: basic-rate taxpayers receive £1,000, higher-rate taxpayers receive £500, and additional-rate taxpayers receive £0. The Labour Party government has yet to address this frozen allowance.
How much savings trigger tax?
To put the risk in perspective, at a savings rate of four per cent, a basic-rate taxpayer would need £25,000 saved to generate £1,000 in annual interest. In contrast, a higher-rate taxpayer would reach their £500 allowance with £12,500 saved.
Tina Hughes, Director of Savings at Yorkshire Building Society, said: “People should be able to save with confidence, but instead many are worried about getting it wrong or being hit with a tax bill they weren’t expecting.”
Future tax increases and ISA changes
Hughes also highlighted upcoming changes: “From 2027, an additional 2p tax on savings income will further erode returns for people who are already struggling to understand where they stand. Alongside this, the reduction in the Cash ISA allowance for under 65s limits how much people can shield from tax in the first place.”
She added: “This isn’t a failure of individuals — it’s the result of a system that hasn’t kept pace with economic reality and leaves too many people in the dark. If we want people to build financial confidence, we need modernised savings tax rules and much clearer guidance, so people understand their position before they’re caught out.”
The warning comes as the government faces pressure to reform savings taxation, with the frozen allowance and upcoming tax changes set to impact millions of savers across the UK.
