A record 4.5 million people are expected to pay income tax on their savings interest this year, according to revised HMRC estimates, around 1.7 million more than previously forecast.
Earlier projections suggested 2.7 million savers would be taxed on interest, but HMRC has since updated its methodology and incorporated more recent income data.
The increase reflects higher savings rates and frozen income-tax thresholds, which have pushed more people into higher tax bands and reduced the value of their Personal Savings Allowance.
Basic-rate taxpayers can currently receive £1,000 of savings interest tax-free, while the allowance falls to £500 for higher-rate taxpayers. Additional-rate taxpayers receive no Personal Savings Allowance.
HMRC expects to collect around £8.4 billion in tax on savings interest during 2026-27, with the total likely to rise further as more savers are pulled into the tax net.
The pressure is also set to increase from April, when tax rates on savings held outside ISAs are due to rise by two percentage points across the income-tax bands, while changes to ISA rules will further affect how some savers shelter cash from tax.
Financial specialists are therefore urging households with substantial cash balances outside tax-free wrappers to review where their savings are held and make full use of available ISA allowances.
