Savers approaching or in retirement face a staggering hike in savings tax, new analysis from Paragon Bank has revealed.
A Freedom of Information request submitted by Paragon to HM Revenue and Customs found individuals aged 65 and over are forecast to pay £2.5 billion in tax on their savings interest in the 2025/26 tax year, a 215% increase compared to 2022/23.
Paragon said tax receipts from savers under 65 are also expected to rise sharply, up 186% to £3.6 billion over the same period. However, the share of total savings interest paid by those aged 65 and over will grow from 39% to 41%.
The steepest increases are among older savers in the additional rate tax band, whose contributions are projected to rise by 307% to £1.1 billion. Higher-rate taxpayers in this age group will see a 169% increase to £885 million, while basic-rate taxpayers will pay 163% more, totalling £518 million.
Andrew Wright, head of savings at Paragon Bank warned that the “significant and rapid” escalation in the tax burden of savers nearing or in retirement could have a profound impact on their long-term financial wellbeing.
“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. One effective way to mitigate some of this increased tax burden is by transferring funds into an ISA, where savings interest is sheltered from tax.
“ISAs remain an accessible and flexible option, empowering savers to protect more of their hard-earned money and make the most out of their nest eggs as they plan for, or live through, retirement,” he said.
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