Savings account users could be facing an unexpected tax bill - what does it mean for you and what are interest limits?

Sign up to our free money newsletter for investment analysis and expert advice to help you build wealth Sign up to our free money email for help building your wealth Sign up to our free money email for help building your wealth SIGN UP I would like to be emailed about offers, events and updates from The Independent. Rising interest rates in the UK since the end of 2021 have been a double-edged sword for people; with the Bank of England’s rate peaking at 5.25 per cent across 2023-24, it meant a more competitive and rewarding environment for those with savings accounts.but higher repayment costs for those with mortgages not locked into fixed rates. With the base rate now down to 4.75 per cent and plenty of analysts predicting another 0.25 basis points drop on Thursday, it means savers could still be looking to lock in favourable returns by opening or maximising existing savings accounts. So, for higher rate earners, if you’ve had £5,000 packed away in a two-year fixed term savings account at a five per cent interest rate, with the amount payable at the end of the two year term rather than monthly or compounded, that is.£500. Guidance and alternative options The government website lists where interest earnings allowance applies from: bank and building society accounts savings and credit union accounts unit trusts, investment trusts and open-ended investment companies peer-to-peer lending trust funds payment protection insurance government or company bonds life annuity payments some life insurance contracts However, there remain ways to save more money in a tax-free environment, such as in a cash ISA.