@amafrikan: UK Chancellor Rachel Reeves has approved rule changes to make it easier for HMRC (Her Majesty's Revenue and Customs) to collect tax on savings interest. This "tax crackdown" is a response to a significant increase in the number of people now earning enough interest on their savings to be liable for tax. This is due to a combination of higher interest rates and frozen tax-free allowances, a phenomenon known as "fiscal drag." Currently, basic rate taxpayers can earn up to £1,000 in interest tax-free, while higher rate taxpayers have an allowance of £500, and additional rate taxpayers have no allowance. With rising interest rates, many people are now surpassing these thresholds and face unexpected tax bills. The new measures are expected to require banks to collect customers' National Insurance numbers and share this data directly with HMRC, allowing the tax authority to automatically adjust tax codes and collect the owed tax from salaries. This is intended to address the current issue where a significant portion of the data shared by banks is "unreadable," making it difficult for HMRC to collect the correct amount of tax. While the new rules are not expected to take effect until 2027, they signal a new approach to savings taxation and could lead to an unwelcome surprise for savers who find their take-home pay reduced. Key Takeaways: Fiscal Drag: Frozen tax thresholds and rising interest rates are pushing more savers into the tax net. HMRC's New Powers: The government wants to make it easier for HMRC to collect tax on savings interest by getting better data directly from banks. Automatic Deductions: Savers on a PAYE (Pay As You Earn) scheme could see tax on their savings interest automatically deducted from their salary through an adjusted tax code. Cash ISAs: Experts are highlighting the importance of using Cash ISAs as a primary savings vehicle, as all interest earned in an ISA is tax-free. #RachelReeves #TaxCrackdown #SavingsTax #HMRC #FiscalDrag #PersonalFinance #CashISA

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Friday 08 August 2025 16:03:21 GMT