UPDATE: |Urgent warning for UK savers amid risk of unexpected tax bills News

The taxman is now targeting those earning more than the frozen personal savings allowance. Here’s what you need to know

Savers are being urged to act swiftly to avoid potential fines from HM Revenue and Customs (HMRC), as it has been revealed that a large number may owe tax without realising it.

This is due to the recent surge in interest rates on savings accounts, leading to the taxman targeting those earning more than the frozen personal savings allowance.

The Personal Savings Allowance, which has remained unchanged since 2016, allows basic-rate taxpayers to earn just £1,000 a year in interest tax-free, while higher-rate taxpayers can only earn £500, and top-rate earners receive no allowance at all.

However, with many easy-access savings accounts now offering over 4% interest, even modest savings can exceed the limit, particularly after three years of rate increases.

Treasury figures predict that an additional 893,000 taxpayers will be affected by 2028-29.

Shockingly, HMRC has admitted that it cannot match approximately one in five bank and building society accounts to the correct taxpayer, meaning thousands may owe tax and never be informed.

Helen Thornley, of the Association of Taxation Technicians (ATT), warned in the Financial Times: “There are quite a few penalties that can build up – failure to notify, late filing, late payment, and then interest on top. It adds up quickly.”

Senga Prior, ATT president, added: “HMRC is making it clear that responsibility passes back to the individual. So we urge anyone who thinks they may owe tax on savings interest to contact HMRC as soon as they can.”

The Association of Taxation Technicians (ATT) has warned that HMRC is only just finishing sending out interest tax notices for the 2023-24 tax year, five months after the deadline to register for self-assessment. This delay has left many savers in the dark.

David Denton, a wealth expert at Quilter Cheviot, suggested that contacting HMRC directly might be more effective than navigating self-assessment. However, he cautioned: “It can be quite painful to phone them up. The lines are often clogged.”

For those who are employed or receiving a pension, HMRC can adjust your tax code to collect the money automatically, but this is dependent on having the correct data.

If they don’t, the responsibility falls squarely on the individual. HMRC stated: “We want to help customers get their tax right, which is why we’ve been writing to people to inform them their savings will incur tax.

“It’s an individual’s responsibility to ensure they pay the correct tax, and they should let us know as soon as possible if they believe they haven’t.”

Critics argue that this approach places the burden entirely on ordinary savers, many of whom may not realise they’ve exceeded the limit until they start receiving fines.