This July’s tax revenue increased by 17% compared to two years prior. The outlook is expected to deteriorate, with approximately 1.7 million additional savers now projected to incur tax on their savings during the current year, exceeding initial estimates.
Recent administrations have sought to circumvent public opposition to higher tax rates by employing a more subtle strategy: maintaining allowances and thresholds at their current levels.
This form of fiscal drag has progressively moved more taxpayers into elevated tax brackets, while simultaneously bringing previously untaxed individuals into the taxation system. Regarding capital gains tax (CGT), the government has taken more aggressive action, raising tax rates and substantially reducing the tax-free allowance. Consequently, CGT revenues have experienced considerable growth over the preceding twelve months.
Strategic CGT planning has become increasingly critical, and – where feasible – it may be prudent to consider retaining assets in anticipation that future government policy on investment taxation may become more favorable.
More savers forecast to pay tax
HMRC’s initial projection anticipated that 2.7 million savers would incur tax obligations on their savings income during 2026/27; however, current estimates indicate this figure has risen to approximately 4.5 million individuals facing tax liability:
- Beyond the effects of fiscal drag, savings rates have remained elevated. As of August 2026, NS&I continues to offer 4.82% on its one-year bonds, with marginally superior rates obtainable through alternative providers.
- The consequences of fiscal drag prove particularly severe for savings income. Wage growth and increased self-employed income will result in numerous savers transitioning from basic rate to higher rate taxation. Furthermore, their personal savings allowance has been diminished from £1,000 to £500.
Along with the 45% tax rate, anyone pushed into additional rate tax will have lost any entitlement to the savings allowance.
With rates of tax on savings income to increase by two percentage points across the board from 6 April 2027, the outlook for savers is somewhat bleak. Details of income tax rates and personal allowances for the current tax year can be found here.