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Pensioners could receive a letter from HMRC (Image: Getty Images)<\/p>\n
Thousands of retirees could face a tax bill on their savings <\/a>accounts this year, a bank has warned. Frozen personal allowance rates and rising interest rates<\/a> mean more people than ever are being drawn into paying tax on their savings.<\/p>\n Paragon Bank warned that more than 1.4 million basic-rate taxpayers face an average bill of \u00a3641 this financial year. The increase in basic-rate taxpayers dragged into the net has been driven by retirees, according to the bank. Andrew Wright, head of savings at Paragon Bank, said: \u201cMany pensioners<\/a> depend on savings interest to support their income, but frozen income tax thresholds and unchanged Personal Savings Allowances are pulling more people into a part of the tax system originally designed for wealthier individuals.\u201d<\/p>\n Making sure your savings are in the best place to maximise them is crucial (Image: Getty Images)<\/p>\n Read more: Barclays \u00a3400 cash bonus payment criteria and April 30 deadline <\/a><\/p>\n Read more: New car and van rule from November 2026 to affect vehicle costs <\/a><\/p>\n He adds: \u201cWith tax on savings income due to increase from April 2027, that pressure will only intensify at a time when households are still contending with the effects of inflation.<\/p>\n \u201cMore mature savers value the stability of cash<\/a> and have saved prudently over many years to build financial resilience, so it’s unfair they are being punished through a tax system not initially designed for them.\u201d<\/p>\n Figures released under a Freedom of Information request show that the number of individuals incurring tax on their savings has more than doubled in just three years, increasing from 1.27 million in 2022\/23 to 2.79 million in 2025\/26.<\/p>\n Basic rate taxpayers in particular are being pulled into tax liability, rising from 613,000 in 2022\/23 to 1.42 million in 2025\/26, a 132% increase.<\/p>\n The Government\u2019s data shows that, on average, savers<\/a> in that tax band will pay an estimated \u00a3641 income tax on average on their savings.<\/p>\n Mr Wright added: \u201cWith the number of taxpayers on savings interest rising so sharply, it\u2019s never been more important for savers to consider using Cash ISAs.<\/p>\n \u201cThe tax-free status of ISAs means savers keep every pound of interest they earn, providing certainty and protection at a time when allowances are frozen and interest rates<\/a> remain competitive.\u201d<\/p>\n Ensure our latest news headlines always appear at the top of your Google Search by making us a Preferred Source. Click here to activate<\/a> or add us as Preferred Source in your Google search settings. <\/p>\n Paragon Bank says the ISA wrapper is one of the best routes for shielding returns from tax (Image: Getty Images)<\/p>\n He says: \u201cThe 132% rise in basic\u2011rate taxpayers paying tax on savings interest is likely being driven by retirees, people with modest incomes but meaningful savings balances.<\/p>\n \u201cOur separate FoI request shows individuals aged 65 plus are forecast to pay \u00a32.5 billion in tax on their savings interest in 2025\/26, a 215% increase on 2022\/23.\u201d<\/p>\n With savings rates<\/a> remaining competitive and the Personal Savings Allowance (PSA) frozen, more savers are breaching the tax-free threshold, resulting in their interest being taxed at 20%, 40% or 45% depending on their income band.<\/p>\n The FOI findings show that as interest rates rose following the 2022 mini-Budget<\/a>, the number of higher-rate taxpayers paying savings tax increased from 387,000 in 2022\/23 to 883,000 in 2025\/26, with the average payment for this tax year expected to be \u00a32,030.<\/p>\n Nearly half a million additional rate taxpayers are also expected to pay tax on savings this tax year (479,000), compared to 271,000 in 2022\/23, with the average bill forecast at \u00a36,990.<\/p>\n![\"A](\"https:\/\/www.newsbeep.com\/uk\/wp-content\/uploads\/2026\/03\/A-person-putting-money-into-a-piggy-bank-6770746.jpg\" "\\"A")
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