Overview
- Many savers now face HMRC tax demands on interest, with a higher‑rate payer breaching their £500 allowance with about £10,000 at 5% and 2.8 million people paying savings tax in 2025–26.
- Crossing the £50,270 higher‑rate threshold halves the Personal Savings Allowance from £1,000 to £500, a change Yorkshire Building Society says many people do not notice.
- Lower earners can pay no tax on up to £18,570 when their income fits rules that combine the £12,570 personal allowance, the £5,000 starting savings rate and the £1,000 Personal Savings Allowance.
- Ministers have kept income tax thresholds frozen until 2031, and the Treasury says raising the personal allowance to £18,000 is off the table because it would cost more than £40 billion a year.
- Campaigners have petitioned Parliament to index thresholds and deliver a one‑off correction in 2031, citing analysis that more than £28 billion has been taxed from savings interest since 2016, with further pressure coming from a cut to the under‑65 Cash ISA limit to £12,000 from 2027.