Savings allowances tighten under Reeves tax crackdown

Savers may see tax collected automatically from wages as the government tightens savings rules.

Savings allowances tighten after Reeves signs tax crackdown

Chancellor Rachel Reeves has approved new rules that require savers to provide their National Insurance number to HMRC. Banks will implement the changes from April 2027, shifting the taxation of interest above the savings allowance to the payroll system rather than self assessment. The savings allowance varies by income tax band: basic rate pays tax on up to £1,000 of interest, higher rate £500, and additional rate has no allowance. A starting rate for savings can apply when other income is low, but it is reduced as income rises. Some products are exempt, including ISAs and certain NS&I accounts, and joint accounts split the allowance among account holders.

The plan signals a shift in how the state collects tax on personal savings. It aims to simplify reporting by moving the tax bill from the annual self assessment to the monthly pay cycle, but it also raises questions about fairness for savers with irregular income or those who rely on low-interest accounts. The changes will increase administrative work for banks and the tax system, even as they reduce the chance of missed payments. The policy sits within a broader push to tighten fiscal controls while keeping individual savings tax predictable for most earners.

Highlights

Watch how the rollout unfolds and whether savers adapt quickly to the new system.