Building Society Issues Urgent Warning Over Savings Tax Changes
Leeds Building Society has sounded the alarm for British savers, cautioning that many could face unexpected tax bills if they fail to grasp the intricacies of savings taxation rules. The warning comes ahead of significant changes to tax rates on savings income scheduled for April 2027.
Upcoming Tax Rate Increases Explained
From April 2027, the tax applied to savings income will increase by two percentage points across multiple brackets. Basic rate taxpayers will see their rate rise from 20 percent to 22 percent on any taxable interest earnings. Meanwhile, higher rate taxpayers will experience an increase from 40 percent to 42 percent, and additional rate taxpayers will face a jump from 45 percent to 47 percent.
Widespread Confusion Over Personal Savings Allowance
Research conducted by Leeds Building Society reveals concerning gaps in public understanding. Approximately a quarter of people surveyed admitted they don't fully comprehend the personal savings allowance system. This allowance permits basic rate taxpayers to earn £1,000 annually in interest without paying tax, while higher rate taxpayers receive a reduced allowance of £500. Additional rate taxpayers receive no allowance whatsoever.
Expert Advice for Concerned Savers
Catherine Wray, senior savings manager at Leeds Building Society, emphasised the complexity many face. "Understanding personal savings allowances and savings tax requirements can be difficult," she stated. "There is a notable proportion of savers, almost one in ten, who are not confident in their understanding of personal savings allowances and are likely to require additional support."
Wray offered practical guidance for those feeling uncertain. "That's why we would encourage anyone who is confused about their own savings allowance to pop into one of our branches to speak to a colleague about reviewing their savings, or to read up about the rules and upcoming changes online."
Building Financial Resilience
The building society's initiative extends beyond mere warnings. "We want to help people to become more financially resilient," Wray explained. "That means encouraging good savings habits and helping people to understand the best options to suit their individual circumstances."
With tax changes on the horizon and widespread confusion about existing rules, the message from Leeds Building Society is clear: proactive financial education and planning are essential to avoid unexpected tax liabilities on hard-earned savings.
