Overview

• Rising interest rates now push savers with as little as £10,000–£14,500 in cash above their Personal Savings Allowance, generating unforeseen tax liabilities.
• HMRC’s tax take on savings interest surged from £1.4 billion in 2021–22 to £5.9 billion in 2024–25 as more savers breach their allowances.
• Personal Savings Allowances of £1,000 for basic-rate and £500 for higher-rate taxpayers have been frozen since 2016, while income-tax thresholds have not moved since 2021, intensifying fiscal drag.
• Automated data-driven enforcement has prompted 1.4 million letters from HMRC warning savers of unpaid tax liabilities on interest.
• Experts urge maximising the £20,000 annual ISA allowance to shield future savings interest from taxation.