The total tax take on savings is on track to hit £6.1bn in the 2025/26 tax year, according to HMRC’s latest figures.
Platform AJ Bell noted the figure was much lower last year than the government initially predicted, but is now back on the rise.
Record cash ISA use and falling interest rates have helped to cut the tax bill, but that effect will dwindle away as more people reach their allowance limits, the firm noted.
Should the £6.1bn figure become a reality it would represent a tripling of the amount paid versus the total from three years earlier.
Laura Suter, director of personal finance at AJ Bell, said: “While higher interest rates have been great for savers to get a decent return on their money, it does mean that more have hit their Personal Savings Allowance and started to pay tax on that interest – often for the first time ever.
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“What’s interesting is that the nation’s savings tax bill was dramatically lower last year than the government had initially predicted.
“It had forecast that we would pay £10.4bn in tax on our savings in 2024/25, but has now revised that down by a whopping £4.5bn to just shy of £6bn,” Suter continued. “This is likely down to two factors: interest rates not staying as high for as long as initially expected and more people sheltering their savings from HMRC.
“We’ve seen record Cash ISA usage in the past couple of years, as people are aware that they will be hit with tax on their savings. In recent months that has been spurred on by rumours of cuts to the Cash ISA limit, prompting a rush to stuff ISAs now.”
The fresh batch of HMRC numbers also revealed the continued impact of fiscal drag, with more people being snared by higher tax bands without earning more money in real terms, due to threshold freezes.
Rachael Griffin, tax and financial planning expert at Quilter, said: “The Conservative government’s decision to freeze income tax thresholds from 2021/22 has become one of the most punishing and wide-reaching stealth tax grabs in recent history.
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“New projections from HMRC show the extent of this shift: since the freeze began, 6.1m more people are expected to be pulled into paying income tax, including nearly two million more pensioners above state pension age, who are projected to number 8.72m,” she continued.
“The number of additional rate taxpayers is set to more than double from 520,000 to 1.23m, and basic rate taxpayers are forecast to rise by three million to 30.4m.
“The Treasury has grown hooked on the tax revenues this freeze generates, and like any addiction, it may prove difficult to kick even when the damage becomes clear.”
