Savers approaching or in retirement are set to face a significant rise in the tax they pay on savings interest, new analysis by Paragon Bank has indicated.

A Freedom of Information request submitted by Paragon to HMRC showed that individuals aged 65 and over are forecast to pay £2.5bn in tax on their savings interest in the 2025/26 tax year – a 215% increase compared to 2022/23.

Tax receipts from savers under 65 are also expected to rise sharply, up 186% to £3.6bn over the same period. However, the share of total savings interest tax paid by those aged 65 and above will grow from 39% to 41%.

Paragon revealed that the steepest increases will be among older savers in the additional rate tax band, whose contributions are projected to rise by 307% to £1.1bn. Higher-rate taxpayers in this age group will see a 169% increase to £885m, while basic-rate taxpayers will pay 163% more, totalling £518m.

Head of savings at Paragon, Andrew Wright, commented: “We’re witnessing a significant and rapid escalation in the tax burden on savers nearing or enjoying retirement. This could have a profound impact on their long-term financial wellbeing.

“Many mature savers are facing unprecedented tax charges on the interest earned from their savings, which can have a substantial impact on their long-term financial wellbeing.”

He added: “One effective way to mitigate some of this increased tax burden is by transferring funds into an ISA, where savings interest is sheltered from tax. ISAs remain an accessible and flexible option, empowering savers to protect more of their hard-earned money and make the most out of their nest eggs as they plan for, or live through, retirement.”

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