More than five million bank accounts dragged into paying tax – do YOU owe HMRC money?

MORE than five million savings accounts will be subject to a tax charge by HMRC this year, new analysis has revealed. Analysis of CACI data by Yorkshire Building Society found the number of savings accounts forecast to earn over £1,000 in interest has increased by 1047% since 2018, when around 462,000 accounts would have been affected. 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. Sign up for the Money newsletter Thank you! 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. The number was around 2.5m in January 2023, the analysis showed, meaning it has more than doubled in the past three years alone. 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 Data from the FCA shows most people hold between 3 and 5 savings products spread across 2-3 providers, so if your interest is spread across accounts, you may not realise you are over the threshold. Tina Hughes, director of Savings at Yorkshire Building Society, said the scale of the shift is “staggering” and frozen thresholds mean more regular people will pay tax on their savings, rather than just well-off savers. “This isn’t about people suddenly becoming wealthy – it’s about a frozen allowance colliding with much higher interest rates,” he said. “People doing the responsible thing – saving for a home, for emergencies or for the future – are now being punished by outdated rules. Most read in Money “The Personal Savings Allowance urgently needs reform so it keeps pace with reality and supports savers, rather than catching them out.” 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. Rachel Springall, finance expert at Moneyfactscompare.co.uk, said: “Those who have been working hard to save for a home might not realise they could be breaching their PSA due to higher interest rates. “To help savers shield their hard-earned cash from tax, it’s wise to take advantage of ISAs.” It comes after new figures revealed around 2.1m retirees were forecast to be hit with a tax bill for interest earned on their savings this year – four times the number of people affected in 2022/23. Comment now