An estimated 1.2 million one-year fixed term savings accounts due to mature before the end of 2025 could generate enough interest to incur a tax payment, research by Paragon Bank has shown.

The bank’s analysis of CACI data suggested the non-ISA accounts due to mature between June and the end of December would generate interest of more than £500, breaching the personal savings allowance (PSA) for higher-rate taxpayers.

Under the PSA, basic rate taxpayers can earn up to £1,000 in savings interest across all accounts held before they incur tax, with higher rate taxpayers able to earn up to £500. Additional rate taxpayers don’t benefit from a PSA.

Of the 1.2 million accounts, Paragon stated that around 822,000 would generate more than £1,000 in interest, resulting in a tax liability for basic-rate taxpayers.

In total, figures showed that 1.7 million one year fixed-term adult non-ISA savings accounts are due to mature between June and the end of the year, with a value of £70.5bn, meaning that seven in 10 accounts would generate enough interest to potentially incur a tax payment.

Head of savings at Paragon, Andrew Wright, said: “Fixed rate savings dominated the market during 2023 and 2024, with many accounts benefitting from high savings rates. Many savers will have had a great return on their savings but could ultimately breach their personal tax allowance as a result.”

He added: “Many of those one-year accounts are now maturing over the next six months and nearly 1.2 million people could potentially receive a tax bill. Therefore, I urge savers review their accounts and make the most of their tax-free allowance by utilising other savings products, including cash ISAs.”

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