The tax burden on savers has increased significantly, with around 300,000 more individuals now subjected to taxation on savings interest compared to five years ago. This rise, from 3.06 million in 2020-21 to 3.35 million currently, is attributed to fiscal drag, which pulls more savers into higher tax brackets due to inflation. While government rules permit tax-free interest earnings under certain conditions, the complexity of the tax system means many individuals face difficulties in navigating their options, highlighting a growing and often hidden tax burden on ordinary savers.
Around 300,000 more savers will have to pay tax on their savings interest than five years ago, stark new figures reveal. The number has jumped from 3.06 million in 2020-21 to 3.35 million this year, according to new information obtained under Freedom of Information laws.
Experts warn that the increase in the number of taxed savers was largely driven by fiscal drag when frozen thresholds pull more people into higher tax bands because of inflation.
The government rules allow most people to earn some interest from their savings without paying tax, utilizing their tax-free personal allowance if not already used.
The situation highlights a growing and often hidden tax burden on ordinary savers, complicating the ability to save in tax-efficient structures.
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