Nationwide backs Mail campaign on savings: Top five building societies support demands to stop tax grab
Nationwide has led a chorus of top building societies calling for the Government to spare hard-pressed savers from being dragged into paying a stealth tax.
Current rules mean any interest earned on savings over £1,000 – or £500 for those in the higher rate income tax bracket – is subject to tax.
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But rising interest rates mean that many with only modest savings will end up doing so.
Nationwide, Britain’s biggest building society, which is run by Debbie Crosbie, together with Skipton, Coventry, Yorkshire and Leeds have all backed the Daily Mail campaign demanding a rethink from Chancellor Jeremy Hunt.
Together the top five building societies hold £311billion of savings deposits in Britain.
Supportive: Nationwide, which is run by chief exec Debbie Crosbie, (pictured) has backed our campaign demanding a rethink from Chancellor Jeremy Hunt.
Tom Riley, director of retail products at Nationwide, said: ‘We are supportive of raising the tax-free threshold for savers, particularly at a time many households are struggling financially.’
Savers have been suffering for years with near-zero interest rates. Back in 2016, then-Chancellor George Osborne introduced the tax-free Personal Savings Allowance – with the £1,000 and £500 thresholds – saying those who have already paid tax on their salaries ‘shouldn’t have to pay a second time when they save it’.
Now rates are rising, which is good for savers. But it also means that what Osborne wanted to stop is happening, effectively penalising consumers for being thrifty.
It means that more than 6million people face paying interest on their savings. Maitham Mohsin, head of savings at Skipton Building Society, said: ‘It would be great to see the Government meeting us halfway in taking another look at the personal savings allowance limit.’
Back in 2016, a basic rate taxpayer could hold just under £70,000 – or about £35,000 for a higher rate taxpayer – without having to pay a penny of income tax.
But rates have risen sharply since then as the Bank of England has hiked its main benchmark rate from 0.1 per cent in December 2021 to 4.5 per cent, and markets expect this to climb further to 5.5 per cent by the end of the year.
Today a basic rate taxpayer would only need about £20,000 – or £10,000 for a higher rate payer – to be dragged into paying tax.
Matthew Carter, head of savings at Coventry Building Society, added: ‘Many savers who have worked hard to build up a decent savings balance could well see double taxation on both income and taxable savings, just at a time when their cost of living is rising fast as a result of inflation.’
Laura Suter, head of personal finance at AJ Bell, has described the frozen PSA thresholds as a ‘stealth tax on steroids’