Savers are being warned to take urgent action—or risk being ambushed by HMRC fines—after it emerged that huge numbers may owe tax and have no idea.
With interest rates on savings accounts having surged in recent years, the taxman is now targeting those earning more than the frozen personal savings allowance.
The Personal Savings Allowance—unchanged since 2016—means basic-rate taxpayers can earn just £1,000 a year in interest tax-free. Higher-rate taxpayers only get £500, while top-rate earners get nothing at all.
But with many easy-access savings accounts now paying more than 4%, even modest nest eggs can breach the limit—especially after three years of rate hikes.
At the same time, the number of people affected is exploding. Treasury figures predict an extra 893,000 taxpayers will be caught out by 2028-29.
Yet in a shocking admission, HMRC has revealed it cannot match around one in five bank and building society accounts to the correct taxpayer—meaning thousands may owe tax and never be told.
Helen Thornley, of the Association of Taxation Technicians (ATT), told the FT: “There are quite a few penalties that can build up—failure to notify, late filing, late payment, and then interest on top. It adds up quickly.”
Senga Prior, ATT president, added: “HMRC is making it clear that responsibility passes back to the individual. So we urge anyone who thinks they may owe tax on savings interest to contact HMRC as soon as they can.”
Taxpayers aren’t supposed to register for self-assessment unless prompted by HMRC—but with delays and mismatches rife, those letters may never arrive.
ATT says HMRC has only just finished sending out interest tax notices for 2023–24—five months after the deadline to register for self-assessment had already passed. In many cases, savers were left guessing.
Wealth expert David Denton of Quilter Cheviot said phoning HMRC directly might be better than tackling self-assessment. But he warned: “It can be quite painful to phone them up. The lines are often clogged.”
For those employed or on a pension, HMRC can adjust your tax code to collect the money automatically—but only if they’ve got the right data. If they don’t, the burden lands squarely on you.
The HMRC said: “We want to help customers get their tax right, which is why we’ve been writing to people to inform them their savings will incur tax.
“It’s an individual’s responsibility to ensure they pay the correct tax, and they should let us know as soon as possible if they believe they haven’t.”
Critics say this puts the onus entirely on ordinary savers—many of whom will be blissfully unaware they’ve tripped the limit until fines begin dropping through the letterbox.
