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Brits who have crossed the £50,271 income threshold as a result of frozen tax bands are being warned of a tax bill many don't see coming. Yorkshire Building Society says millions of people earning over that amount are left "confused, anxious and exposed" to unexpected tax bills because of a "widespread" misunderstanding of the Personal Savings Allowance (PSA).

The mutual says a 10-year long freeze in savings tax rules and fiscal drag are quietly pushing more people into higher rate tax. Fiscal drag is where inflation and increasing earnings push taxpayers into higher tax brackets. When someone enters the higherrate band, their PSA is instantly halved, from £1,000 to £500 - a shift "many fail to notice or understand", according to Yorkshire Building Society.

Tina Hughes, director of savings at the mutual, said: "Many higher rate taxpayers don't recognise themselves as such. They haven't had a sudden lifestyle change or big pay rise - they've simply been nudged over a frozen threshold. Overnight, their savings allowance is halved, yet our research shows most people don't fully understand what that means.

"People should be able to save with confidence, but instead many are worried about getting it wrong or being hit with a tax bill they weren't expecting."

Ms Hughes said from 2027 an additional 2p tax on savings income will further erode returns for people who are already struggling to understand where they stand.

She added: "Alongside this, the reduction in the Cash ISA allowance for under65s limits how much people can shield from tax in the first place.

"This isn't a failure of individuals - it's the result of a system that hasn't kept pace with economic reality and leaves too many people in the dark.

"If we want people to build financial confidence, we need modernised savings tax rules and much clearer guidance so people understand their position before they're caught out."

Yorkshire Building Society reports that with higher rate taxpayers holding an average of £20,659 in nonISA savings, even modest interest rates can quickly generate taxable income.

Its research shows these savers expect to earn around £703 a year in savings interest, above their £500 allowance.

The mutual says that despite such scenarios public understanding of how and when savings tax applies remains worryingly low.

Yorkshire Building Society reports that many people wrongly believe higher rate taxpayers can earn up to £740 in interest before paying tax, while others think the allowance should be significantly higher.

Some believing it ought to be as much as £1,000. The mutual says such misunderstandings underline just how unclear savings tax rules have become.

It warns the situation is set to worsen. From 2027, the introduction of the additional 2p tax on savings income will increase the amount people must hand over on interest earned above their allowance.

For those who are already unknowingly breaching the £500 PSA, this change could result in larger and more painful tax bills - even where savings balances and interest rates have barely changed.

Yorkshire says uncertainty around how tax is paid also adds to the problem, with 44% of higher rate taxpayers believing their bank or building society automatically deducts any tax owed on savings interest.

Thirty-one percent have never checked whether they need to declare or pay tax themselves. As a result, more than a third (35%) say they are worried about receiving an unexpected tax bill - anxiety driven by uncertainty rather than deliberate noncompliance.

The mortgage lender says that a the heart of this issue is fiscal drag as frozen income tax thresholds steadily pull more people into the higherrate band without real incomes rising - instantly reducing how much interest they can earn tax free.

HMRC figures reported by the mutual suggest the number of higher rate income taxpayers is projected to reach 7.08 million in 2025-26, a 38.7% increase compared with 2022-23.

Yorkshire Building Society called for reform of the "outdated" PSA and for clearer, more accessible communication around savings tax.

The research was carried out by Opinium for Yorkshire Building Society. Two thousand UK adults were questioned between March 27-31.