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NINE out of 10 savers have not had to worry about paying income tax on the interest from their cash deposits for years, but that has suddenly changed as savings rates rocket.

-  Harvey Jones

Under the personal savings allowance (PSA), launched in 2016, basic rate 20 per cent taxpayers pay no income tax on the first £1,000 of interest each year, while higher rate 40 per cent taxpayers can earn £500 free of tax.

When even the best savings accounts only paid around 1 per cent, a basic rate taxpayer could have £100,000 breaching in the bank before the PSA.

Today, as savings rates soar past 6 per cent, basic rate taxpayers with just £17,000 in a best buy account could face a shock tax bill. That falls to just £8,500 for higher rate taxpayers (additional rate 45 per cent taxpayers don't get a PSA).