More than two million people aged 65 and over are set to pay tax on their savings income in the 2026/27 financial year, Paragon Bank has found.

A freedom of information request to HMRC revealed that 2.1 million people in this age group are expected to face an income tax liability on their savings. This is more than four times the figure recorded in the 2022/23 financial year.

The total tax liability on savings income among people aged 65 plus is forecast to reach £3.34bn in the current tax year, compared to £795m four years previously.

Those in this age range are expected to account for 47% of all taxpayers with an income tax liability on savings, up from 42% in 2022/23.

Paragon Bank said the growing number of retirement-age savers who could face tax on the interest generated by their savings.

It comes as the cash ISA allowance will drop from £20,000 to £12,000 for those aged 64 and under in the next tax year. For those aged 65 and over, the allowance will be retained. Paragon stated this highlights an opportunity for those individuals to limit their tax exposure.

Head of savings at Paragon Bank, Andrew Wright, concluded: "Millions of older savers are being pulled into the tax net, putting more of their retirement savings at risk, with four times as many savers aged 65 plus incurring a tax bill on their interest than just four years ago.

"With savings often providing vital financial security later in life, it is important to regularly review where your money is held. Making full use of your ISA allowance can help protect more of your hard-earned interest from tax and those aged 65+ have the benefit of retaining the full £20,000 cash ISA allowance from next tax year."

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