By SYLVIA MORRIS

Updated: 17:08 BST, 3 June 2025

Savers with £11,000 or more in their accounts may need to get in touch with HM Revenue & Customs to avoid paying a nasty fine.

That’s because last week it told me it has contacted all savers it knows owe for the 2023-24 tax year.

But some have slipped through the net and won’t have been told they have an outstanding bill.

The number of savers who need to pay tax has ballooned in recent years as rates have risen – and HMRC seems to have buckled under the pressure. It said it has had difficultly matching a fifth of savings accounts to taxpayers based on information it receives from banks and building societies.

Hopefully if you owe you will have heard from HMRC that your tax code has been adjusted to collect the tax. Anyone who has not received a letter for 2023-24 and believes they owe tax should get in touch with HMRC to discuss their situation. It is legally up to you to work out your tax and pay it.

Here’s how to work out what you owe. First, apply the starting rate for savers. This allows you to earn up to £5,000 in interest tax-free if you have a total income of £17,570 or below. Say you earn £16,000 from a job or pension and have made £4,000 in interest on your savings.

The number of savers who need to pay tax has ballooned in recent years as rates have risen – and HMRC seems to have buckled under the pressure

The number of savers who need to pay tax has ballooned in recent years as rates have risen – and HMRC seems to have buckled under the pressure

The first £12,570 of your income is tax free due to your personal allowance. Therefore you pay 20 pc tax on £3,430 (£16,000 minus £12,570). This means £686 of income tax.

Next you can introduce the £5,000 starting rate. The remaining £3,430 of your salary reduces your starting rate to £1,570 tax-free. If you have earned £4,000 interest on your savings, only £2,430 is taxable (£4,000 minus £1,570).

Next, you make use of your personal allowance. Basic rate taxpayers can earn £1,000 of interest without having to pay taxes. If you’re in the higher rate income tax band it’s £500, if you’re in the additional rate there’s no allowance. Everything above your personal savings allowance is taxed at your marginal rate.

In this example, the £2,430 taxable amount is reduced to £1,430 when the basic rate personal savings allowance is applied. So, you will pay 20 per cent tax on this – £286.

Figures will differ in Scotland because tax rates vary.

If your non-savings income is higher than £17,570, you can skip the ‘starting rate for savers’ element and just apply your personal savings allowance to calculate what you owe.

And remember that any savings within an Isa are tax free anyway.

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You could face a nasty fine if you have more than £11,000 in savings: SYLVIA MORRIS reveals the urgent steps you must take

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