In January 2018, about 462,000 UK savings accounts were on course to earn more than £1,000 in interest in a year. Today the figure is 5.3 million. Yorkshire Building Society put the numbers together from CACI data and published them on 13 August 2026.
That is a rise of 1047% for non-ISA accounts, and it matters because £1,000 is the point where a basic-rate taxpayer runs out of tax-free interest.
An allowance that stood still
The Personal Savings Allowance started on 6 April 2016. A basic-rate taxpayer can collect £1,000 in interest a year and owe nothing on it. Higher-rate taxpayers get £500. Additional-rate taxpayers get nothing. Interest above the limit is taxed at the saver’s usual income tax rate.
Back then the typical easy-access account paid 1% at most, so very few ordinary savers ever came close. Now most pay 3% or more. The building society worked out what that does to a household’s room for manoeuvre. In 2016 a basic-rate taxpayer could hold £100,000 in a typical savings account and stay under the allowance. In 2026, at rates of 4%, the same saver could hold only around £25,000. For higher-rate taxpayers, those earning over £50,271, the safe balance drops to around £12,500.
How fast it moved
The pandemic years brought a dip, when rates were close to nothing. In January 2022 only 172,000 accounts risked a tax charge. A year on, that count had grown by more than fourteen times, and in January 2023 it stood at 2.5 million. It has more than doubled since.
Many people may not know they are affected. According to the Financial Conduct Authority, people usually keep 3 to 5 savings products with 2-3 providers, so no single statement shows the full amount of interest earned. A Yorkshire Building Society survey of 2,000 UK adults, run by Opinium, found that 36% had never heard of the allowance and only 31% knew how to pay tax if they went over. Brit Brief reported that those who breach it may receive a bill from HMRC or a change to their tax code.
For families saving toward a first home, the timing is awkward. The median house deposit is now £36,500.
Tina Hughes, the society’s Director of Savings, called the shift “staggering”. Savers, she said, had not suddenly grown rich; the cause was an allowance that never moved meeting far higher interest rates. She called for reform of the allowance. Rachel Springall of Moneyfactscompare.co.uk agreed that the allowance had not kept pace, and pointed out that around a third of consumers do not really understand it.
Both advised savers to add up the interest across every account and consider ISAs. The society singled out anyone with £20,000 or more in competitive savings deals.
Sources
- Over five million UK savings accounts now at risk of tax bills as PSA drag pulls ordinary savers into tax net – Yorkshire Building Society
- HMRC to send tax bills to 5.3M UK households with savings – Brit Brief
