Then rates climbed. The allowance didn't move.

HMRC data obtained by Paragon Bank and reported by Which? this week shows what that freeze is doing. An estimated 542,000 savers will face more than £2,000 in tax on their savings income in 2026–27, up from 119,000 in 2022–23. Those expected to owe more than £10,000 have risen from 28,000 to 109,000.

Here's the mechanism, in numbers you can check against your own account.

For a basic-rate taxpayer, £100,000 earning 1% produces £1,000 a year. That's the full Personal Savings Allowance. The same £100,000 earning 5% produces £5,000. Your savings didn't become five times larger. The interest they produced did. The tax-free allowance stayed where it was.

For a basic-rate taxpayer, the extra £4,000 would generally be taxable, subject to the rest of their circumstances.

Paragon's Andrew Wright identifies the mechanism. Higher rates deliver better returns, but they also push more savers past an allowance that has not risen with them.

If you're a higher-rate taxpayer, your allowance is smaller still. It's £500. Additional-rate taxpayers get no Personal Savings Allowance at all.

And HMRC may not send you a separate bill. If you're taxed through PAYE, it can adjust your tax code using information from banks and building societies. The extra tax can come out of your pay before you realise what has changed.

The freeze isn't a one-off, either. From April 2027, savings-income tax rates are due to rise by two percentage points. Rates rise to 22% for basic-rate taxpayers, 42% for higher-rate taxpayers and 47% for additional-rate taxpayers.

At the same time, the Cash ISA allowance for people under 65 is due to fall from £20,000 to £12,000 a year. The overall ISA limit will remain £20,000, but the cash route will be narrower.

That's not advice. It's the shape of where this is heading. There's less room to shelter cash, and more of what's left outside it exposed to tax.

The question worth sitting with isn't what you should do about your savings. It's simpler. Do you know how much interest you earned last year, and whether it crossed £500 or £1,000?

For some savers, the answer will arrive not as a decision, but as a change to their tax code.

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Sources. Which?, 9 September 2026 (Paragon Bank/HMRC FOI data); HMRC and HM Treasury publications on the April 2027 savings-income tax rate change and Cash ISA reform.

Status. Fact-checked and cleared for publication. Routing is B, the Daily Money slot.