HMRC issues warning to anyone who's had £1,000 paid into bank account

800,000 people could be hit with tax bills from HMRC as a result of frozen thresholds, new figures show Shawbrook Bank is warning that more than six million accounts are now in line to breach the personal savings allowance – a rise of 800,000 in a year.

Under HMRC, you may get up to £1,000 of interest and not have to pay tax on it, depending on which Income Tax band you're in. This is your Personal Savings Allowance. To work out your tax band, add all the interest you've received to your other income.

Monitoring platform, CACI, examined October’s data from the Current Account and Savings Database which showed 6.1 million accounts are set to receive more than £1,000 in interest – which would almost certainly generate a tax bill for the owner.

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Adam Thrower, head of savings at Shawbrook, said: “In the past, tax on savings was something that not many needed to think about due to the low interest rates on offer. However, with higher rates now available, many savers could encounter an unexpected pitfall that eats into their hard-earned interest. For savers wanting to take advantage of the higher rates on offer while protecting hard-earned cash from tax, Isas might be worth considering.”

The personal savings allowance is currently £1,000 for anyone paying the basic rate of income tax. It drops to £500 for those in the higher-rate bracket and becomes zero for additional-rate payers. Anyone whose savings interest exceeds their allowance must start paying income tax on it at their normal rate.

Rachel Springall, of Moneyfactscompare.co.uk, said: “The freeze means savers have years to endure no increase to income tax thresholds. Hard-pressed savers will inevitably breach their personal savings allowance, so cash Isas will be a popular lifeline for those looking for a tax-free wrapper.”

Alice Haine, of investment company Bestinvest, said: “Keeping tabs on exactly how much interest you have earned over the course of the financial year can be hard for people to track, particularly if they have multiple savings accounts with different interest rates applied.

“Savers might not even realise they could be liable for tax on their nest eggs at all and may be surprised to receive a bill from HMRC.”