Millions of Brits face tax bills on their savings next year. If you are tax planning in Cheshire or Oswestry, HMRC is scheduled to send tax bills in the form of a ‘prudence penalty’. Affected savers are facing a tax bill averaging around £2,300 per head.
With the ‘fiscal drag’ net expanding to include more people, Treasury forecasts indicate that over 2.7 million people across the country will be liable for payable tax on savings. HMRC is looking to take around £6.6 billion in total, with an estimated 2% more people scheduled to get caught in the net. Financial analysts are warning that unless you complete a tax return on time, you may breach your allowance, with deductions being calculated by PAYE. This could be applied retrospectively to include unpaid tax from previous years.
The popularity of cash Isas is such that some people in the financial sector have warned about a lack of investing. In part this has in recent months been a response to the Budget, with savers maximising the benefits of cash Isas before allowances changed. At a structural level though, analysts say it reflects a behavioural pattern in the UK of the cautious asset-rich sitting on too much cash. Ultimately, the tax burden will see those people paying to remain uninvested.
Defending its tax plans, the Treasury said the government was committed to keeping the £20,000 Isa allowance tax-free, claiming that by the end of this Parliament, most people will be £1,000 a year better off.
