{"id":519999,"date":"2025-10-22T16:14:17","date_gmt":"2025-10-22T16:14:17","guid":{"rendered":"https:\/\/www.europesays.com\/uk\/519999\/"},"modified":"2025-10-22T16:14:17","modified_gmt":"2025-10-22T16:14:17","slug":"new-income-tax-warning-to-more-than-one-million-pensioners-with-money-in-a-savings-account","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/uk\/519999\/","title":{"rendered":"New income tax warning to more than one million pensioners with money in a savings account"},"content":{"rendered":"

More than 14 million people in the UK are thought to have over \u00a310,000 saved in cash.<\/p>\n

07:52, 21 Oct 2025Updated 13:57, 22 Oct 2025<\/p>\n

The latest HM Revenue and Customs (HMRC) figures show that more than 1.1 million people over State Pension<\/a> age are facing a tax bill for interest earned on their savings accounts. Data obtained by investment platform AJ Bell shows that 1,160,000 pensioners are expected to incur an income tax liability on their savings income for the current financial year – 2025\/26.<\/p>\n

The total has jumped from 493,000 in 2022\/23, to 953,000 in 2023\/24, and 1,090,000 in 2024\/25. AJ Bell <\/a>said those over State Pension age account for nearly half (44%) of the 2,640,000 taxpayers expected to pay income tax on cash savings interest earned in the current financial year.<\/p>\n

The platform said it has highlighted concerns about the growth in the number of people paying tax on savings<\/a> income, amid interest rate rises in recent years as well as frozen tax thresholds.<\/p>\n

READ MORE: New and Basic State Pension payment rates from April – check yours now<\/a>READ MORE: New call for DWP to change State Pension payment inheritance rules<\/a><\/p>\n

This includes the personal savings allowance for interest, which enables basic rate taxpayers to earn up to \u00a31,000 in savings interest tax-free, while higher rate taxpayers have an allowance of \u00a3500.<\/p>\n

Savers can keep money in ISAs to ringfence it from the taxman.<\/p>\n

There has been recent speculation that the annual allowance for putting money into cash ISAs could possibly be reduced, as part of moves to encourage people to invest.<\/p>\n

More than 14 million people in the UK are thought to have over \u00a310,000 saved in cash, and the Government believes some of this could be invested in the stock market to improve people\u2019s financial health.<\/p>\n

It is understood that several potential options are on the table and no decisions have been made.<\/p>\n

Charlene Young, senior pensions and savings expert at AJ Bell, said: \u201cMost people have a personal savings allowance \u2013 \u00a3500 or \u00a31,000 for higher and basic rate taxpayers respectively \u2013 which offers some protection from the taxman\u2019s clutches. Likewise, ISAs and pensions are the perfect way to shield your savings and investments and maximise your returns.\u201d<\/p>\n

She added: \u201cIn retirement it is common to hold a little more cash. People often want to de-risk some of their investments and those with a good handle on their spending needs might look to build a cash flow ladder, or funnel, to match what they\u2019ve got planned for the next few years.<\/p>\n

\u201cWith an immediate need to take income from assets, it is natural to focus a little more on capital preservation, meaning cash becomes an increasingly useful tool, despite the risks from inflation over the long term.<\/p>\n

\u201cUnfortunately, that appears to be leading to a large number of pensioners suffering a tax bill on their cash savings, with increasing numbers being dragged into higher tax bands too.\u201d<\/p>\n

\"AnMore than 14 million people in the UK are thought to have over \u00a310,000 saved in cash.(Image: Getty )<\/p>\n

To help avoid unnecessary tax bills on savings, Ms Young suggested not taking money from a pension \u201cunless you need it\u201d.<\/p>\n

She said: \u201cYou\u2019ll pay income tax on withdrawals above your tax-free cash allowance and, once it\u2019s outside a pension, you may be subject to capital gains or dividend tax if you invest it elsewhere. If you park the money in cash you may find yourself with an added income tax bill \u2013 joining more than one million pensioners with a tax liability on cash savings.<\/p>\n

\u201cSecond, if you want to hold cash as part of your investment strategy, you can do so within a pension. You don\u2019t have to hold the money in the bank.<\/p>\n

\u201cYour provider may offer a relatively attractive rate of interest on cash held in a pension, or you could hold investment products that are comparable to cash, such as money market funds.<\/p>\n

\u201cYou could also think about using an ISA to shelter up to \u00a320,000 a year. Some savers have been paying into regular savings accounts chasing a fractionally higher return in recent years, but that may have backfired for those who find the tax bill now outweighs any additional interest earned and regret not paying into an ISA sooner.\u201d<\/p>\n

State Pension and tax<\/p>\n

Guidance on GOV.UK<\/a> states: \u201cYou pay tax if your total annual income adds up to more than your Personal Allowance. Find out about your Personal Allowance and Income Tax rates.<\/p>\n

Your total income could include:<\/strong><\/p>\n