Britain is getting poorer: Taxes on people will become draconian

Anyone with over £3,500 in their savings is being warned.
Photo: Getty Images

People with £3,500 or more in savings are being told they could face an unexpected tax bill letter from His Majesty’s Revenue and Customs (HMRC), ‘Express’ reports.

HMRC is able to automatically detect interest on savings generated by your bank account and if you tip over a certain threshold, you will automatically be sent a notice of an extra tax bill. With the new tax year 2025-26 having started in the past month, the taxman has been busy sending out letters to people urging them to register for self-assessment or asking them to pay extra tax. Because your entire previous financial year is now complete, HMRC is now assessing people’s final situations and issuing tax bills to those who it finds owe money in tax on savings accounts. Such information is automatically reported to the taxman by your bank unless it is in a Cash ISA, which is protected from tax.

The Personal Savings Allowance means you can make £1,000 per year in savings interest without being taxed on it, but this only applies to people earning less than £50,270.

If you earn £50,271 or more, your Personal Savings Allowance is cut to just £500.

And if you earn £125,000, your Personal Savings Allowance drops to £0.

The exact amount you will owe depends on how much you earn, how much interest you got, and when it was paid out.

But you could be stung with a tax bill with as little as £3,500 in savings if you had placed it into a fixed savings account for three years, because the interest is all paid out in one go in a fixed account, so the interest counts in only one tax year all at once.

If you put £3,500 into a fixed savings account at 5% for three years, you will earn more than £500 in interest. With fixed accounts, the interest is “crystallised” the moment the interest is paid out and you receive all the interest at once. So if you put it away for three years, the money is paid out all in one go at the end of that three-year term.

With just over £500 being paid out at once, you would go over your £500 Personal Savings Allowance even without taking into account any interest from any other accounts you hold and can expect a letter from HMRC.

And because you are a higher-income earner, you lose 40% of every £1 over £500, not 20%

So even going £100 over the Personal Savings Allowance would cost you £40.

If you had more money in savings, you could go over the allowance even with a non-fixed, easy-access account. For example, if you put £11,000 in a savings account for one year at 5%, you would earn £550 of interest, which would push you above the threshold and mean you owe tax to HMRC if you earn over £50,270.

Even if you earned less than £50,270, if you had savings of £21,000 at 5% for one year, you would generate £1,050 of interest and owe money to HMRC because you would exceed your £1,000 allowance.

…The British government has no more resources. Trying to rob its own population looks like hysteria. Good luck!

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