HMRC Personal Savings Allowance 'halved' as many face unexpected tax bill

HMRC Personal Savings Allowance 'halved' as many face unexpected tax billNew research has found that many people haven't even heard of itCommentsMoneySteven Smith Content Editor01:14, 05 Apr 2026View 3 ImagesTaxpayers could end up with an unexpected bill(Image: nicoletaionescu via Getty Images)People with savings accounts are being given a warning as an allowance reaches its 10th anniversary and has been branded 'outdated'. Millions of savers hit by fiscal drag - where salaries rise, but HMRC's tax-free allowances remain static - will pay tax on their savings if they sit outside of an ISA wrapper, according to Moneyfactscompare.co.uk.‌The Personal Savings Allowance (PSA) marks its 10-year anniversary on Monday, April 6, 2026, which is the start of the new tax year. However, despite changing interest rates and fiscal drag, it has never been amended.‌Savers now receiving interest from the top one-year bond a year ago that paid 4.58 per cent on a £20,000 deposit would have earned £916, breaching the £500 PSA for higher-rate taxpayers and very close to the £1,000 PSA for basic-rate taxpayers.‌A £20,000 investment in the top one-year ISA that paid 4.45 per cent would have earned £890, completely tax-free. Moneyfacts said that a survey conducted by Yorkshire Building Society revealed that more than a third of consumers had never heard of the PSA and in the past decade basic-rate taxpayers had paid more than £4.7bn in tax on their savings interest.View 3 ImagesNobody wants an unexpected tax bill(Image: coldsnowstorm via Getty Images)Rachel Springall, finance expert at Moneyfactscompare.co.uk, said: “Cash ISAs have proven their worth to savers over many years, especially as fiscal drag causes millions to breach their Personal Savings Allowance (PSA). April marks the 10-year anniversary of the PSA and while it protected savings interest from tax when it was launched for many, it’s outdated and needs to change.‌"Interest rates are higher tha...