UK households who have over £10,000 in savings warned they're 'at risk'

James Rodger

11 November 2024 at 8:43 am·2-min read

UK households who have over £10,000 in savings warned they're 'at risk' — -Credit: (Image: Reach Publishing Services Limited)

People with over £10,000 in savings have been told to maximise their cash by picking the right easy-access savings account. Savers have been urged to take action as bank customers are losing billions in a stealth tax raid, it is feared.

Paragon Bank is warning more than three quarters of money held in non-ISA savings accounts could be hit with unexpected tax bills. A staggering £639.7billion of the £831.6billion currently held in non-ISA adult savings accounts is generating enough interest to potentially trigger tax payments.

The figures, released by Paragon Bank following analysis of CACI data, show that 77 per cent of total balances are at risk of breaching tax thresholds. Higher-rate taxpayers face a Personal Savings Allowance (PSA) of just £500, after which they must pay tax at 40 per cent on their savings interest.

At current interest rates, a savings balance of £12,500 earning four per cent would generate £500 in annual interest, reaching the higher-rate PSA limit. Derek Sprawling, Paragon Savings' managing director, warned: "These rising balances, fuelled by higher rates relative to the previous decade, leave some of the most proactive savers exposed to unexpected tax bills.

He added: "Cash ISAs offer a valuable shield against this burden, allowing savers to shelter up to £20,000 per year from tax." Over three quarters (77%) of the £831.6bn currently held within non-ISA adult savings accounts is earning enough interest to potentially incur a tax payment.

Paragon Bank analysed CACI data and found that £639.7bn of the total would generate interest above £500. Paragon stated that the number of non-ISA adult savings accounts generating sufficient interest to exceed the £500 interest threshold stood at 9.7 million during September 2024, which were the latest figures available, representing just 14% of total non-ISA adult savings accounts.

The bank suggested this means most of the wealth is concentrated in a smaller proportion of accounts.

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