Overview

• Crossing the £50,270 higher‑rate income tax threshold cuts the Personal Savings Allowance from £1,000 to £500, which can make extra interest leave you worse off.
• Martin Lewis illustrated the effect with scenarios showing a worker on £49,300 who takes home £894 from £1,000 interest once pushed over the threshold versus £950 take‑home from £950 interest when just below it.
• Tax specialists say the issue is becoming more common as savings rates rise, cautioning that many basic‑rate taxpayers could now brush up against the cliff edge.
• Experts Aaron Peake and Gerard Boon criticised the system’s complexity and suggested merging the savings starter rate with the Personal Savings Allowance or tapering the allowance to smooth the drop.
• Banks report interest to HMRC but it is not always taxed at source, so advisers urge savers to check tax codes and self‑assessment details while the Treasury has been asked for comment.