The rising personal tax burden is becoming harder to ignore. This July’s tax take was 17% higher than just two years ago, while many more savers are now expected to pay tax on their savings than originally forecast.
One reason is fiscal drag. Rather than increasing headline tax rates, governments have kept allowances and thresholds frozen. As incomes rise, more people are brought into the tax system or pushed into higher rates.
Capital gains tax (CGT) has gone further, with tax rates increasing and the tax-free allowance being significantly reduced. It is therefore no surprise that CGT receipts have also risen over the past year.
Careful planning around CGT is becoming more important. Where circumstances allow, some people may consider holding on to assets for longer in case the tax treatment of investments becomes more favourable in future, although there is no certainty that policy will move in that direction.
More savers are paying tax
Savings are another clear example of the rising personal tax burden.
HMRC originally forecast that 2.7 million savers would pay tax on their savings income in 2026/27. The latest estimate puts that figure at around 4.5 million.
Higher savings rates are part of the reason. At the time of writing in August 2026, NS&I was paying 4.82% on its one-year bonds, with slightly higher rates available elsewhere.
Fiscal drag can make the position more difficult too. As employment or self-employed income rises, some savers may move into a higher tax band. Their Personal Savings Allowance can then fall from £1,000 to £500.
For Scottish taxpayers, savings income is still taxed at UK-wide savings rates, although Scottish Income Tax bands apply to non-savings, non-dividend income.
Anyone who moves into the additional rate loses the Personal Savings Allowance altogether.
A further increase from April 2027
The tax position for savings will become less favourable again from 6 April 2027, when rates of tax on savings income are due to rise by two percentage points across the board.
With more people already paying tax on their savings, frozen thresholds continuing to have an effect and higher savings tax rates on the way, it is worth keeping an eye on how savings and investments fit into your wider tax position.
Details of the current Income Tax rates and personal allowances can be found here.