Martin Lewis issues warning to people with over this amount in savings

Martin Lewis, the founder of Money Saving Expert, has issued a stark warning to savers about the potential tax implications due to the current high-interest rates. On his ITV show, The Martin Lewis Money Show Live, he highlighted that the landscape for tax on savings "really has changed very much" in recent years, with interest rates on savings accounts jumping from around 1% to approximately 5%.

This increase means more individuals with savings could be liable for tax on their interest earnings as they may exceed their Personal Savings Allowance—the threshold of interest income one can earn before being taxed. Martin cautioned: "So look, savings tax is back for many. When you get interest on your savings, it is eligible for income tax. It counts as income."

He further explained the allowances, saying: "But you get a Personal Savings Allowance. What this means is a basic rate taxpayer can earn £1,000 a year of interest and you don't pay tax on it. It can be in any form of savings account that you like.

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"As a higher 40 percent taxpayer, you can earn £500, as a top 45 percent taxpayer if you earn over £125,000 a year you don't get one of these."

Martin warned that a basic rate taxpayer with £20,000 in savings might owe tax within a year, while a higher rate taxpayer earning £50,270 annually could face tax on just £10,000 saved, reports the Express.

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Martin said: "So what does that mean in practice? So if you take that top 5 percent figure, as a basic rate taxpayer if you have over £20,000 in savings at 5 percent, you would earn more than a grand of interest so everything above that would be taxed.

"As a higher rate taxpayer it's £10,000. So for those people saving £100, £1,000, £2,000, it's irrelevant to you if you're a basic rate or higher rate taxpayer.

"For those people who've got savings that get into the tens of thousands of pounds, tax starts to become more important.

"And the reason it's come back is, when interest rates are 1 percent, to earn £1,000 of interest you needed a hell of a lot in savings. Now they're 5 percent, you need a fifth of it, so it really has changed very much."