Savers facing £5,000 tax bills on interest nearly triples as HMRC figures reveal growing burden

The number of savers facing tax bills of at least £5,000 on their savings interest has almost tripled in four years, according to new HM Revenue and Customs (HMRC) figures.

Around 144,000 people are forecast to pay at least £5,000 in tax on savings income in 2026/27 — up from 52,700 in 2022/23, a rise of 173 per cent — according to data sourced by Paragon Bank.

The number has climbed steadily each year: 117,000 savers were expected to face similar bills in 2023/24, rising to 133,000 in 2024/25 and 137,000 in 2025/26.

The surge comes during a period of elevated savings rates and growing cash balances held outside tax‑efficient accounts.

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Savers with large sums outside ISAs remain fully liable for income tax on interest earned above their Personal Savings Allowance.

Around 1.1 million instant‑access non‑ISA accounts hold at least £100,000 each, with a combined balance of more than £260.7billion, analysis of CACI data shows.

Large balances can generate substantial taxable interest, particularly while rates remain above historic averages.

The Personal Savings Allowance has remained unchanged despite rising rates.

Basic‑rate taxpayers can earn up to £1,000 in interest tax‑free, higher‑rate taxpayers £500, and additional‑rate taxpayers receive no allowance.

Interest above these thresholds is taxed at 20, 40 and 45 per cent respectively — rising to 22, 42 and 47 per cent next year.

Paragon calculated that a basic‑rate taxpayer would need around £650,000 in savings earning four per cent interest to generate a £5,000 tax bill.

A higher‑rate taxpayer would require roughly £325,000 at the same rate to incur a similar liability.

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Andrew Wright, head of savings at Paragon Bank, said the figures showed how savings taxation is affecting a growing number of people.

“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.

“With CACI data showing 1.1 million non‑ISA savings accounts hold more than £100,000, it is clear there are a lot of people with larger balances who may need to think carefully about how their money is structured.

“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.”

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