Pensioners could be most at risk of not realising they have to pay tax on their savings, with some fearful of falling foul of rules, advisers have warned.
While interest rates rose during 2023-24, many have missed the fact they may now need to declare a higher level of interest income to HMRC.
Colin Low, managing director at Suffolk-based firm Kingsfleet, said this risk is of particular concern to pensioners.
He added: "This is happening at the same time that accountancy practices do not have the resources to take on clients with lower levels of tax liability as it is uneconomic to do so.
"Likewise, HMRC have limited capacity for receiving enquiries from the public. Whilst most income is paid net of tax, from pensions and employment say, savings interest has been paid gross, namely without tax deducted, for a number of years."
For basic rate taxpayers, there is a savings allowance of £1,000 but this could now not cover many pensioners' savings interest.
Two years ago a saver with £50,000 would have received around £500 in annual interest, but this could now be around £2,000 or even more.
Mark Scott, director and IFA at Positive Advisers, said this issue is compounded by the fact that more pensioners now have to pay tax due to an increase of the state pension.
He added: "At annual reviews, I’m having to explain why the taxman is writing to them to claim money back. I’ve got one client in particular who finds the situation very stressful and is scared to take money out of her personal pension and spend because she’s worried about how the taxman is after her."
While Graham Wells said a lack of education around tax and savings means thousands will be due tax on their savings interest this year without realising it.
Though, he added much of this will be taken care of automatically by HMRC.
Wells said: "Plenty of people with savings in the bank will pay extra tax this year, but whether or not they notice that will depend on their level of financial awareness."
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tara.o'connor@ft.com
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