Some 3.8mn people will be hit with “shock tax bills” as they are brought into a higher tax bracket, according to analysis of figures from the Office for Budget Responsibility.
Coventry Building Society estimates that 1.4mn will enter the 40 per cent tax bracket and see their personal savings allowance cut in half.
Jeremy Cox, head of strategy at Coventry Building Society, said: “Millions of savers will be hit with a shock tax bill or stealth changes to their tax codes as they exceed their personal savings allowances in this tax year.
“The OBR’s estimates are a clear sign that people should take urgent action to review their finances and start actively managing their tax-free savings.”
The tax-free allowance on savings interest is set at £1,000 for basic rate tax payers, and drops to £500 for anyone earning over £50,270.
While the allowance is not available for those earning more than £125,140.
Cox said to soften the blow, Brits can take advantage of Isas, where anyone can save up to £20,000 a year tax free.
He added: “Without the protection of an Isa, higher rate taxpayers need just £10,000 earning a best buy rate of 5 per cent before the interest they receive uses up their £500 personal savings allowance. After that they would be hit with 40 per cent tax on any additional interest they are paid.
“Tax bills will steadily rise for anyone with non-ISA savings that has exceeded their personal savings allowance.”
tara.o'connor@ft.com
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