According to a report in the Telegraph, the UK government is preparing to announce a major change for savers in the upcoming November Budget. The government plans to cut the amount of interest people can earn tax-free from their cash savings.
What is Being Cut?
The cut will target the Personal Savings Allowance (PSA). The PSA is the amount of interest you can earn each year before you have to pay income tax on it. Currently, most basic-rate taxpayers can earn £1,000 tax-free.
The government is looking for ways to raise more money to fill gaps in the national budget. By reducing the PSA, more people will start paying tax on their savings interest sooner.
Who Will Be Affected?
This change comes at a time when interest rates are high. High rates mean people are earning more interest on their savings than they have in years.
While many low-income savers may still remain within the allowance, this cut will primarily affect:
- Affluent savers with large cash deposits.
- Middle-income families who have seen their savings interest surge recently.
The move is highly controversial, as it punishes people who have been responsible and managed to build up a substantial cash buffer. It is an unexpected revenue-raising measure for the government.
