Sarah Bradford explains why rising interest rates may mean savers now have to pay tax on their savings income.
Rising interest rates are good news for savers who will receive a better rate of return on their savings. However, this may also have unwanted tax consequences. Savers who have previously received savings income tax-free may now find there is some tax to pay.
This article looks at how savings income is taxed and the impact of higher interest rates, and suggests ways to mitigate any potential tax bill.
Taxation of savings income
The rules governing the taxation income are quite complex; the rate of tax charged and the allowances available depend on the amount and type of income that the taxpayer has.
Interest on savings is only taxable if it is not sheltered by the taxpayer’s personal allowance or their personal savings,
