UK savers facing sharp rise in tax liabilities on interest

New HMRC figures indicate that approximately 4.51 million people in the UK are forecast to owe income tax on savings interest in the 2026/27 tax year. This represents a nearly 270 per cent increase from the 1.22 million people recorded in 2022/23.

Pensioners are among the most significantly affected groups. The number of individuals aged 65 and older expected to pay tax on savings is projected to rise to 2.1 million, up from 517,000 in 2022/23.

This sharp increase is attributed to the combination of higher interest rates on savings and the government's decision to freeze income tax thresholds and personal savings allowances. Under current rules, basic-rate taxpayers can earn up to £1,000 in interest tax-free, while higher-rate taxpayers are limited to £500. Additional-rate taxpayers receive no tax-free savings allowance.