A bank boss has urged savers to be wary of the taxman taking a bite out of their earnings as interest rates rise.
Millions of account holders face being liable for tax if their interest earnings top £1,000 a year – or £500 for higher-rate income tax payers.
The limit was less likely to sting savers when rates were near zero. But now returns are rising, it is expected to catch out many more.
Warning: Paragon chief exec Nigel Terrington (pictured) has urged savers to be wary of the taxman taking a bite out of their earnings as interest rates rise
Nigel Terrington, chief executive of Paragon – which has more than 225,000 direct savings customers – told the Mail: ‘You’ve had 15 years of near-zero interest rates and now interest rates are higher, the interest received becomes more meaningful.’
Terrington, who was speaking as Paragon reported half-year results, said the lender enjoyed a ‘bumper’ season for individual savings accounts (ISAs) – which unlike standard savings accounts are tax-free on investments of up to £20,000 year, though do not always offer the best rates.
The Mail highlighted how leaving the threshold frozen will drag more and more savers into paying tax.
Terrington said: ‘It’s great that the Daily Mail are encouraging people to make sure they understand their tax positions.’
Seven years ago when the exemption was first introduced, a basic rate taxpayer would have needed a savings pot of close to £70,000 to become liable.
But now it would only take £20,000 to be held in savings for the tax to kick in.
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