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    State pensioners given £1,000 HMRC savings warning – and told of ‘rapid escalation’

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    By Ben Hurst

    Copyright manchestereveningnews

    State pensioners given £1,000 HMRC savings warning - and told of 'rapid escalation'

    Pensioners are bracing themselves for a tax hike of more than 200% on the interest generated from their savings, according to research by Paragon Bank. Drawing on figures from HMRC, the bank found that savers aged 65 and over are expected to fork out £2.5bn in taxes on their savings interest during this tax year. This represents a whopping 215% surge compared to what was paid in the 2022/23 tax year. Tax receipts from savers under 65 are also set to climb dramatically, rising 186% to £3.6bn over the same timeframe. Yet the share of total savings interest tax paid by those aged over 65 will climb from 39% to 41% – with the key figure being any more than £1,000 in savings interest earnings likely to be hit with a tax bill. “We’re witnessing a significant and rapid escalation in the tax burden on savers nearing or enjoying retirement. This could have a profound impact on their long-term financial wellbeing,” commented Andrew Wright, head of savings at Paragon Bank. “Many mature savers are facing unprecedented tax charges on the interest earned from their savings, which can have a substantial impact on their long-term financial wellbeing.” Growing numbers of people have been forced to pay tax on their saving income after interest rates soared but the government’s personal savings allowance stayed frozen. The personal savings allowance allows basic-rate taxpayers to earn up to £1,000 in savings interest tax-free, whilst higher-rate taxpayers receive just £500. Additional-rate taxpayers receive no allowance at all and pay tax on all interest earned outside of tax-free accounts like ISAs. “More mature savers typically have healthy savings balances and a preference for less volatile investments, so favour cash,” stated Wright. “ISAs remain an accessible and flexible option, enabling savers to safeguard more of their hard-earned money and maximise their nest eggs as they plan for, or live through, retirement,”With the personal saving allowance and income tax thresholds frozen, that has resulted in better returns for savers aged 65 or above translating into a greater tax burden. “ISAs remain an accessible and flexible option, enabling savers to safeguard more of their hard-earned money and maximise their nest eggs as they plan for, or live through, retirement,”There are also other factors, such as more people opting to work for longer, thus potentially maintaining higher incomes. “So, how can you avoid charges on your saving interest? Wright suggested one effective method to alleviate some of this increased tax burden was by transferring funds into an ISA, where savings interest is protected from tax.” ISAs remain an accessible and flexible option, enabling savers to safeguard more of their hard-earned money and maximise their nest eggs as they plan for, or live through, retirement,”ISAs remain an accessible and flexible option, enabling savers to safeguard more of their hard-earned money and maximise their nest eggs as they plan for, or live through, retirement,” he stated. “Savers can deposit £20,000 into an ISA without paying any tax on it.”

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