HANDS OFF OUR CASH!

The tax burden is set to increase this year, so it pays to pull out the stops to limit your exposure, writes Personal Finance Editor HARVEY JONES. Here are some easy steps you can take to protect more of your hard-earned money from the taxman

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thresholds, rising pension incomes and changing rules, the price of getting it wrong is climbing fast.

HOW TO MINIMISE TAX ON YOUR SAVINGS:

PENSIONERS got some rare good news in the recent Budget, as they can still shelter £20,000 a year in a Cash ISA, while the under-65s will be restricted to £12,000 from April 6, 2027. Older savers typically prefer the comfort of guaranteed, tax-free interest rather than risking their capital in the stock market, even if shares can produce a superior long-term return.

Most also benefit from the personal savings allowance (PSA), which lets basic-rate 20% taxpayers earn £1,000 of interest a year tax-free. That falls to £500 for higher-rate 40% taxpayers and nothing at all for 45% additional-rate payers.

Those rates have been frozen since the PSA was launched in 2016, while interest rates have risen strongly, and today more than a million pensioners pay income tax on their savings interest.

Jeremy Cox, head of strategy at Coventry Building Society, highlighted some less good news in the Budget, as Reeves introduced a new tax surcharge on savings interest, which will increase the tax bill for anyone exceeding their PSA.

“From April 2027, basic-rate taxpayers will pay 22% on interest over £1,000, while higher-rate taxpayers face a steep 42% on interest above £500,” he says.

“Additional-rate payers face a 47% charge.”

Cox highlights another threat. “As income tax thresholds remain frozen, more savers risk entering higher tax bands where their PSA will be cut, exposing them to that 2% surcharge.”