HMRC is set to issue demand letters to 81,000 more people facing tax bills of £10,000 or more on their savings, according to new research from Paragon Bank. The bank has warned that 109,000 individuals will owe more than £10,000 in tax on savings income in the 2026-27 tax year, up from 28,000 in 2022-23 – a rise of 81,000.
More than half a million face bills above £2,000
The research, based on HMRC data, also shows that 542,000 savers will owe more than £2,000 in tax in 2026-27, compared with 119,000 in 2022-23 – an increase of 355%. Previously released Freedom of Information figures from Paragon Bank indicated that the number of people with tax liabilities above £5,000 is expected to reach 144,000 in 2026-27, up from 52,700 four years earlier.
Andrew Wright, head of savings at Paragon Bank, said: “Hundreds of thousands of people are now facing tax bills running into thousands of pounds on their savings income. The number expected to owe more than £2,000 has risen more than fourfold since 2022-23, while almost four times as many people are facing bills above £10,000.”
Higher interest rates push savers over allowance
Wright attributed the surge to higher interest rates, which have delivered better returns for savers but also pushed more people over their Personal Savings Allowance. “Particularly those with larger balances or income from several different accounts,” he said.
He advised savers to “regularly check the interest they are earning across all their accounts and understand whether it could create a tax liability. Making use of ISA allowances and other tax-efficient options, where appropriate, can help people keep more of the return their money generates.”
How the savings tax rules apply
Under current rules, if your other income is £17,570 or more, you are not eligible for the starting rate for savings. If your other income is less than £17,570, your starting rate for savings is a maximum of £5,000. Every £1 of other income above your Personal Allowance reduces your starting rate for savings by £1.
Savers may also get up to £1,000 of interest and not have to pay tax on it, depending on which Income Tax band they are in – this is known as the Personal Savings Allowance. The rising number of tax liabilities means more savers will need to check their position and consider tax-efficient options before the end of the tax year.
