Tax raid on bond interest

MORE than a million savers will face an income tax bill on their interest as fixed-rate savings accounts mature between now and the end of the year.

- By Harvey Jones

One-year fixed-rate savings accounts holding more than £70billion are due to mature between June and December, according to new figures from Paragon Bank.

Around 1.2 million of those accounts will generate more than £500 in interest, breaching the tax-free limit for many and potentially triggering an income tax charge.

Basic-rate taxpayers can earn up to £1,000 of annual interest tax-free under what's known as the Personal Savings Allowance (PSA).

However, higher-rate taxpayers are only allowed £500, while additional-rate taxpayers get no PSA at all. Savers with larger sums in fixed-rate accounts, especially those who locked into rates of 5% or more last year, may find themselves exceeding these limits for the first time.