HM Revenue & Customs (HMRC) is intensifying its efforts to collect tax from savers, sending £5,000-plus tax demand letters to 144,000 individuals. According to data obtained through a Freedom of Information request, the number of people expected to pay £5,000 or more in tax on their savings interest will surge from 52,700 in 2022-23 to 144,000 in 2026-27.
The broader impact is striking: over 2.7 million savers are projected to pay tax on their savings income in 2026-27, up from 2.2 million in 2023-24, based on HM Treasury statistics.
Andrew Wright of Paragon Bank, which secured the data, warns savers about the increasing tax implications: “These figures show that tax on savings is no longer an issue affecting just a small number of people. As balances have grown and interest rates have remained relatively high, far more savers are now facing substantial tax bills on their interest.”
READ MORE: DWP Accumulates £1,300 Debts for Carers Despite Requests to Stop Payments
READ MORE: DWP Urged to Halt Unnecessary PIP Reassessments Affecting 500,000 Disabled Claimants
Sarah Coles from stockbroker AJ Bell comments on upcoming changes to cash ISAs proposed by the Labour Party: “It’s a bitter blow for savers that the cash ISA allowance is being cut. This means those with sizable savings and those diligently setting money aside will face severe tax consequences for doing the right thing.”
In response, a Treasury spokesman stated: “We are reforming the cash ISA to encourage more people to invest in stocks and shares – which have historically performed better than cash savings – and we have retained the generous £20,000 tax-free limit. These changes will make people better off and will not require anyone to move existing savings from their cash ISA. The vast majority of savers will continue to pay no tax on their savings. The Treasury and HMRC are working rapidly with industry on detailed rules and will provide updates on next steps in due course.”