More than six million accounts could be at risk of breaching the personal savings allowance (PSA) and facing a tax bill, Shawbrook Bank has warned.

The bank’s latest analysis of CACI data found that as savers aim to take advantage of the high savings rates on offer with the PSA remaining frozen, many could get unknowingly dragged into paying tax on their savings.

The PSA thresholds, which were introduced in 2016, were designed to let savers earn a limited amount of interest tax-free. However, with rising interest rates, an increasing number of savers are now exceeding their respective thresholds.

Shawbrook also revealed that as of October 2024, nearly one million additional non-ISA savings accounts had breached the basic £1,000 PSA threshold compared to October 2023.

Head of savings at Shawbrook, Adam Thrower, said: "In the past, tax on savings was something that not many needed to think about due to the low interest rates on offer. However, with higher rates now available, many savers could encounter an unexpected pitfall that eats into their hard-earned interest.

"This is especially true for those higher rate taxpayers who can only earn £500 in interest tax-free, and additional rate taxpayers who have no personal allowance for interest on savings. Currently, a higher rate taxpayer saving £11,000 in a non-ISA paying 4.57% could see them breach the personal allowance of £500.

"For savers wanting to take advantage of the higher rates on offer while protecting hard-earned cash from tax, ISAs might be worth considering. Allowing you to save up to £20,000 tax free per person, ensuring you have made adequate use of this before the limit resets in April could be worthwhile."

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