People with non-ISA savings account 'sleepwalking' into massive tax bill

UK savers are "sleepwalking" into an avoidable tax bill with NINE PER CENT complacent about their non-ISA savings accounts. People with non-saving ISAs wrongly think they don't need to worry about paying tax, financial experts have warned.

Nine per cent of savers who have more than £20k+ in non-ISA savings accounts don’t believe they have enough in savings to worry about paying tax. A five per cent interest rate could put them over their Personal Savings Allowance, the study found.

PSA hasn’t been changed since it was introduced in 2016, meaning that the basic rate taxpayers have an allowance of is £1,000. For higher rate taxpayers this decreases to £500, and for additional rate taxpayers £0. A fifth of savers do not know how the tax on their savings is calculated, the research found.

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And 17 per cent have never declared their interest earnt from their savings. Adam Thrower, Head of Savings at Shawbrook said: “It’s shocking to know quite how many people could be sleepwalking into an avoidable tax bill by not paying attention to their savings.

"The Personal Savings Allowance has remained frozen since its inception, yet interest rates are much higher now compared to when this came into force, thus unaware savers could find themselves unnecessarily paying tax on their hard earned savings.

“The good news is that making use of ISAs is an easy way to reduce the tax burden. ISA accounts have a limit of £20,000 per tax year which for a couple means they could be saving up to £40,000 tax-free each year if they both open an ISA account.

"With the new tax year only just beginning, now is the time to start your year of savings right. Interest rates on ISAs remain high and there are accounts suited for everyone, from easy access to longer-term fixed-rate ISAs.

"However, the window of opportunity to secure a high-interest rate ismay be closing as we await the Bank of England’s expected base rate cut in the summer.”