Additional rate taxpayers are set to see the tax paid on their savings income nearly double in just four years, new data from Paragon Bank has shown.
A Freedom of Information request to HM Revenue & Customs found additional rate taxpayers are forecast to face an average income tax liability of £6,540 on their savings in 2026-27, compared with £3,710 in 2022-23. It represents an increase of 76% over four years.
Paragon Bank said the increase is considerably higher than among other taxpayer groups. Basic rate taxpayers are expected to pay an average of £620 in 2026-27, an increase of 7% on 2022-23.
Meanwhile, higher rate taxpayers are expected to pay £1,710 this tax year, broadly in line with the £1,740 recorded in 2022-23.
The bank said the figures highlight the growing tax implications for savers with larger balances held outside tax-free accounts, particularly as fiscal drag brings more people into higher tax brackets.
Andrew Wright, head of savings at Paragon Bank, said: “Better savings rates have been good news for savers, but they can also come with a higher tax bill.
“Unlike basic and higher rate taxpayers, additional rate taxpayers do not receive a Personal Savings Allowance, so tax may be due from the first pound of interest they earn. Checking the total interest earned across all your accounts and making use of your ISA allowance can help you understand your position and protect more of your returns from tax.”
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