Millions more people to start paying tax of up to £5,821 on savings from next year – exactly what YOU need to do

MILLIONS more savers will have to pay tax on their savings from next year – with some taking a hit of over £5,000 The number of taxpayers facing a bill on their savings interest is forecast to surge from 1.22million in 2022/23 to 4.51million in 2026/27. Millions more savers will have to start paying tax of more than £5,000 Credit: Getty That is an increase of 3.29million people – or 269% – in just four years, according to analysis by savings app Spring. The figures, obtained from HMRC through a Freedom of Information request, show that basic-rate taxpayers will be hit hardest. Sign up for the Money newsletter Thank you! It is forecast to rise by 332%, from 475,000 in 2022/23 to 2.05million in 2026/27. Those savers are expected to pay an average of £804. Meanwhile, the number of higher-rate taxpayers affected is set to jump from 405,000 to 1.52million – an increase of 275%. Their average bill is forecast to be £1,684. Additional-rate taxpayers face the biggest bills, with the number affected expected to rise from 301,000 to 682,000. These savers are forecast to pay an average of £5,821 each. Most read in Money Although additional-rate taxpayers will make up only 15% of those paying tax on savings income in 2026/27, they are expected to contribute almost half of the total bill. Their combined contribution is forecast to reach £3.97billion – equivalent to 49% of the total. Get FREE tax guidance about inheritance, property and capital gains worth £250 * If you click on this link we will earn affiliate revenue Are you sick of handing over your hard-earned cash to the taxman? You could slash your tax bill legitimately with the right planning, from inheritance tax on your home to savings and pensions. Award-winning financial advice firm Kellands Chartered Financial Planners are offering Sun Money readers a free one-hour consultation with their experts worth £250. Claim your free session today Kellands (Hale) Limited is authorised and regulated by the Financial Conduct Authority. FCA Firm Reference No: 193498 Why are more savers paying tax? The personal savings allowance – the amount you can save outside of an ISA without paying tax – is up to £1,000, depending on your tax bracket. A basic rate taxpayer can earn £1,000, while a higher rate taxpayer can earn £500. Additional-rate taxpayers do not receive one. Inflation, a higher interest rate environment and frozen tax-thresholds have contributed to millions more people being liable to pay tax on their savings interest. Derek Sprawling, head of money at Spring, said: “Higher rates have helped savers generate better returns on their savings, but they have also pushed millions beyond their tax-free Personal Savings Allowance. “With the allowance frozen, more people are being dragged deeper into the tax net, including more than two million basic-rate taxpayers.” How can I protect my savings? Saving into an ISA – either a cash ISA or a stocks and shares ISA – will shield your savings interest from tax, so it may be a good idea to consider saving into an ISA before opening a taxable savings account. Savers can currently put up to £20,000 into ISAs during each tax year, with interest and returns protected from Income Tax. Derek said: “As well as making use of tax-free options such as ISAs, some of the additional tax burden could be offset by making the most of all surplus cash. “Any balances in current accounts not earning interest could boost interest earned overall, even after the tax take.” Comment now