HMRC is planning a crackdown on savers who exceed their personal savings allowance.
Banks and building societies will be required to provide HMRC with savers’ National Insurance numbers, making it easier to collect tax on savings interest.
The new rules will apply to new and existing customers with traditional savings accounts. However, they won’t apply to current accounts or tax-free savings such as Individual Savings Accounts (ISAs).
Could this mean more people paying tax on savings interest, and how will it impact the self-employed who report savings interest on their Self Assessment?
New rules on savings tax – how will they work?
The amount savers earn in interest is already shared with HMRC by banks and building societies.
However, around 20 per cent of the data is unreadable, which means the right amount of tax isn’t always collected.
By receiving National Insurance numbers from banks, HMRC says it will make it easier to match third-party data to taxpayer records.
An HMRC spokesperson told Moneyweek that the new rules will ‘make it easier for customers to get their tax right first time’ and ‘prevent error and fraud’.
How much is the personal savings allowance?
Basic rate taxpayers have a personal savings allowance of £1,000 a year. This falls to £500 for higher rate taxpayers, while additional rate taxpayers have no personal savings allowance.
If you go over your allowance, you pay tax on any interest over this amount at your usual rate of income tax.
Read more about paying tax on savings on the government website.
When will the rules be introduced?
The new rules are expected to be introduced from April 2027.
They have already been approved by the Chancellor Rachel Reeves and are expected to be formally introduced via legislation during 2026.
What does this mean for the self-employed?
If you’re self-employed, it’s already a requirement to include savings interest on your annual Self Assessment tax return. However, the new rules could make it easier for HMRC to see whether you’ve exceeded your savings allowance.
This means accurately reporting and paying the amount you owe will be even more important. If you report or pay an incorrect amount, you could receive a bill or fine from HMRC.
If you’re employed and pay tax through PAYE, any tax you owe on savings interest could be deducted directly from your pay. As a result, fewer savers will need to file a Self Assessment.
An expensive project for HMRC
It’s been estimated that the changes will cost HMRC £35 million. They could also cost banks around £10 million each and take years to implement.
HMRC intends to make back the cost through tax receipts. Over three million savers are estimated to need to pay tax on their savings this year, up 120,000 on the previous year.
How can I avoid paying tax on my savings interest?
The best way to avoid paying tax on savings is to use a tax-free ISA or a tax-free savings alternative like Premium Bonds. Each tax year you can pay up to £20,000 into an ISA tax-free.
In the last five years, an extra 300,000 people have been required to pay tax on their savings interest, according to Nottingham Building Society.
This is because more people have been pushed into higher tax bands due to frozen tax thresholds.
And according to AJ Bell, around £20 billion in interest will be earned from traditional savings accounts this year. Approximately £6 billion of this will be owed in tax to HMRC.
More tax guides for the self-employed
- Can HMRC check your bank account without your permission?
- HMRC issues scams warning with Self Assessment on the horizon
- Pension inheritance tax changes set to affect thousands
- HMRC and Companies House to shut joint filing service from 2026
Ready to set up your cover?
As one of the UK’s biggest business insurance providers, we specialise in public liability insurance and protect more trades than anybody else. Why not take a look now and build a quick, tailored quote?