Brits with savings of £3,500 or more are being warned they could be hit with an unexpected tax bill from . HMRC has the ability to automatically detect interest on savings generated by your bank account and if you exceed a certain limit, you will automatically receive a notice of an additional

With the new tax year 2025-26 having kicked off in the past month, the taxman has been busy dispatching letters to individuals urging them to register for self-assessment or requesting them to pay extra tax.

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Now that your entire previous financial year is wrapped up, HMRC is currently evaluating people's final situations and issuing tax bills to those who it determines owe money in tax on savings accounts.

Such data is automatically reported to the taxman by your bank unless it is in a , which is shielded from tax.

The Personal Savings Allowance allows you to earn £1,000 per year in savings interest without being taxed on it, but this only applies to people earning less than £50,270. If you earn £50,271 or more, your Personal Savings Allowance is reduced to just £500.

And if you earn £125,000, your Personal Savings Allowance plummets to £0, reports . The precise amount you will owe depends on how much you earn, how much interest you received, and when it was paid out.

Stashing your savings into a fixed account could leave you facing a hefty tax bill, with experts cautioning that you might be hit by HMRC demands having accumulated as little as £3,500 in savings after tying it up for three years.

The catch lies in the fact that interest on fixed accounts is paid out in a lump sum, meaning all the interest is considered for one tax year at once.

If you tuck away £3,500 into a 5% fixed savings account for a trio of years, you're on track to collect upwards of £500 interest. Fixed accounts mean the interest gets locked in - or "crystallised" - as soon as it's paid, so after three years, you're handed the full amount.

With the whole £500+ interest landing in your lap simultaneously, say goodbye to your £500 Personal Savings Allowance and brace for a nudge from the taxman.

For those raking in higher wages, the sting bites harder – coughing up 40% on every quid past £500, not merely 20%. Dip just £100 beyond your allowance, and it'll cost you a tidy £40.

And if you're sitting pretty with heftier sums in savings, even an easy-access account might breach the threshold. Pop £11,000 into an account at 5% for a year, and you'd snag £550 interest, sneaking over the limit and potentially nudging you into owing tax, especially if your earnings are above the £50,270 mark.

Even those earning under £50,270 could owe HMRC money if they accumulate over £1,000 in interest from savings, as you'd break the threshold with an interest of £1,050 on savings of £21,000 at a 5% rate.

Multiple sources of income are considered in your Personal Savings Allowance. The Government explains the process, stating: "If you're employed or get a pension, HMRC will change your tax code so you pay the tax automatically.

"To decide your tax code, HMRC will estimate how much interest you'll get in the current year by looking at how much you got the previous year."