HMRC is dispatching its notorious brown letters to individuals who have £10,000 or more in their bank accounts, as new figures reveal that 2.8 million people paid tax on their savings during the 2025-26 tax year. This number has more than doubled from 1.3 million in 2022-23.
Personal Allowance Frozen Until 2031
For the 2026/27 tax year, which runs from 6 April 2026 to 5 April 2027, the standard UK Personal Allowance remains at £12,570. This is the amount of income you can earn each year without paying Income Tax. The allowance has been frozen at this level since 2022 and is scheduled to remain unchanged until 2031.
When Do Savers Exceed Their Allowance?
Figures indicate that a basic-rate taxpayer would exceed their allowance if they have £20,000 stashed in an account paying 5% interest. For a higher-rate taxpayer, the threshold is just £10,000 in the same account. This means HMRC could be sending letters demanding tax payments from individuals with as little as £10,000 in savings.
Last year, approximately 1.42 million basic-rate taxpayers paid an average of £641 in tax on savings interest, while 883,000 higher-rate taxpayers paid an average of £2,030, according to Spring.
Expert Advice for Savers
James McCaffrey from the credit score app TotallyMoney advises: “When it comes to savings, if it looks too good to be true, it might well be. Check the small print – headline-grabbing rates don’t always tell the full story.”
Derek Sprawling at Spring adds: “Check how long any bonus lasts, what balance it applies to, and what rate you will earn once it ends.”
Rachel Springall from Moneyfacts notes: “It can mean you earn no interest whatsoever on higher balances. This is when savers need to reassess where to put their extra cash.”
HMRC Rules on Savings Interest
Under HMRC rules, basic-rate taxpayers (20%) can earn £1,000 in interest each tax year before paying tax. Higher-rate taxpayers (40%) can earn £500 in interest each tax year. Additional-rate taxpayers (45%) do not receive a Personal Savings Allowance.
Martin Lewis, the BBC and ITV star, explained: “In practice, you’d currently need over £21,000 at the top easy-access savings rate to generate £1,000 interest, so only basic rate taxpayers with more are taxed. For higher rate taxpayers, you’d need £10,500 at that rate to generate £500 interest.”
