Individuals with non-ISA savings accounts may face increased tax liabilities due to the way interest is taxed. If one selects a fixed-rate savings account that pays all interest at maturity, it could push them over their Personal Savings Allowance in a single tax year. Experts advise opting for accounts that distribute interest monthly or annually, or to use fixed-term ISAs to avoid taxes on interest altogether.
You are taxed on the interest on your savings when it is accessible by you. So if you pick a fixed-rate savings account that pays out all the interest at maturity, for tax purposes all of that interest will be counted in one tax year.
Many people won't realise that [fixed rate accounts] could leave them with a tax headache in the future.
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