A expert and stock trader has warned that people in the UK with savings exceeding £3,500 may be in for an unexpected tax shock courtesy of .
Michael Taylor shared his insights on , explaining the recent surge in has inadvertently pushed many people over the interest allowance threshold. “This is because have been high over recent years, which will have unknowingly put many over the interest allowance,” he cautioned.
“And if you’re a basic rate taxpayer this means you can earn up to £1,000 in interest tax-free, but this number falls to just £500 if you’re a higher rate tax payer – so that’s anyone earning over £50,270.”
He also highlighted an “even bigger risk” for individuals with fixed-rate savings accounts, which typically pay out at the end of the term. Using an example, Michael illustrated the potential tax implications: “So if you put £4,000 into a three-year savings account at a 5% , then if you’re a higher-rate tax payer, you will be paying 40% on everything above £500.”
Furthermore, he pointed out that the thresholds have not kept pace with rising wages and inflation, resulting in a “stealth tax” that leaves people no better off despite paying more. On a more positive note, however, he concluded by suggesting a solution: “You can actually get around the limited interest allowance by putting money into a cash ISA (Individual Savings Account) and this means that any interest is tax-free and the ISA allowance is £20,000 every tax year – the rule here is to use it or lose it.”
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One furious user slammed in response: “How can they justify taking so much from us all? Absolute robbery!” A second hit out at those in power, asking: “Are the government intentionally trying to make people leave the UK? Because that’s what’s going to happen.”
Meanwhile, a third commenter lamented over the country’s economic state: “The UK is now a joke and a total financial mess. Cannot wait to leave and pay tax where it isn’t wasted but spent sensibly! Failed leadership after failed leadership for years!”
Whilst a fourth person: “All this rather than just tax the rich who pay accountants to squirrel their money away using loopholes.”
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advises on its website: “If you go over your allowance, you pay tax on any interest over your allowance at your usual rate of income tax. If you’re employed or get a pension, will change your tax code so you pay the tax automatically.
“To decide your tax code, will estimate how much interest you’ll get in the current year by looking at how much you got the previous year.”