THE UK's tax system is incredibly complicated but it gets truly Byzantine when it comes to savings, making it incredibly hard to work out what you owe on the interest you generate.
This was not much of an issue when savers got almost no interest but it matters today, with best-buy rates paying 6 per cent or more. Millions now face a shock tax bill after exceeding their personal savings allowance (PSA), introduced in 2016 to allow savers to take a tax-free chunk of interest each year. Many will have forgotten all about it until HMRC came knocking.
Lower earners, particularly pensioners, may benefit from another forgotten tax break called the starting rate for savings.
This is even more complicated than the PSA, said MoneyComms' banking expert, Andrew Hagger: "When they overlap things get really messy."
Under the PŠA, launched in 2016, 20 per cent taxpayers can earn £1,000 in tax-free savings interest, while 40 per cent taxpayers can earn £500-45 per cent taxpayers do not qualify.
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