HMRC to tax savers again as rates hit 5% – ‘earning too MUCH interest’ | Personal Finance | Finance

A basic-rate taxpayer who secured a 5 percent return would hit the PSA with just £20,000 of savings, falling to £10,000 for a higher-rate taxpayer.

Former Chancellor Rishi Sunak’s decision to freeze income tax thresholds for five years only adds to the danger.

This will push millions into a higher rate tax bracket, at which point their PSA will shrink or disappear altogether.

Government figures forecast a 44 percent leap in the number of people in the higher-rate tax band and a 50 percent increase in those hitting the additional rate band.

The risk of reaching the PSA will continue to grow, says Andrew Hagger, savings expert at MoneyComms.co.uk. “As rates rise, more will suddenly face an unexpected tax bill, unless they take action.”

Anyone who thinks they are going to breach the allowance should consider move their savings into a tax-free cash Isa, Hagger added. “Every UK adult can pay up to £20,000 into an Isa each year, so a couple can shelter £40,000 between them.”