Increased tax take pulls more savers into the tax net

Rising tax rates and reduced tax-free allowances drive a sharp increase in CGT receipts

This July’s tax take was 17% higher than just two years ago. The situation is set to worsen, with around 1.7 million more savers now expected to pay tax on their savings this year than originally forecast.

Recent governments have tried to avoid the backlash associated with increased tax rates by using a stealthier approach: keeping allowances and thresholds frozen.

Such fiscal drag has pulled more and more taxpayers into higher rates of tax, as well as bringing those who were previously non-taxpayers into the tax net. When it comes to capital gains tax (CGT), the government has gone further, with tax rates increased and the tax-free allowance severely cut. So it’s not surprising that CGT receipts have seen a significant increase over the past year.

Careful CGT planning is more important than ever, and – where possible – it might make sense to try to hold on to assets where possible in case future government policy towards the taxation of investments becomes less punitive.

More savers forecast to pay tax

HMRC originally forecast that 2.7 million savers would pay tax on their savings income for 2026/27, but the latest estimate shows some 4.5 million now face a tax bill:

• Apart from the fiscal drag aspect, savings rates have remained high. At the time of writing (August 2026), NS&I is paying 4.82% on its one-year bonds, with slightly higher rates available elsewhere.
• The impact of fiscal drag is particularly harsh regarding savings income. Background pay increases and higher self-employed earnings will mean that many savers are now paying higher rate tax instead of the basic rate. In alignment with this, their personal savings allowance will have been reduced from £1,000 to £500.

Along with the 45% tax rate, anyone pushed into additional rate tax will have lost any entitlement to the savings allowance.

With rates of tax on savings income to increase by two percentage points across the board from 6 April 2027, the outlook for savers is somewhat bleak. Details of income tax rates and personal allowances for the current tax year can be found here.

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