New data indicates that millions more Brits will be hit with a tax bill on their savings this year, as frozen thresholds and rising interest rates pull them into the tax net. A previous Freedom of Information (FOI) request from AJ Bell suggests that nearly one million basic-rate taxpayers are expected to be affected in the 2023/24 tax year, a sharp increase from about half a million in 2022/23.

When combining higher and additional rate taxpayers, an estimated 2.07 million individuals will have to pay tax on their savings interest – a stark jump from just 650,000 three years prior and a rise of 1.42 million. Despite this, there are measures that can be taken to legitimately sidestep this issue.

Laura Suter, director of personal finance at AJ Bell, has issued a warning, reports . She commented to say: "More than two million people will face a tax bill on their savings interest this tax year, as rising interest rates and frozen tax thresholds have pushed more people into these tax bills."

She highlighted a potential pitfall, adding: "The thorny issue is that lots of people won't realise they owe tax until a brown letter lands on their doormat. While those filling out a self-assessment tax return will declare any savings interest and subsequent tax due, those taxed under PAYE get any tax liability calculated by HMRC based on information sent to them by banks and building societies."

Suter explained the implications for workers. She said: "Often, this will then mean your tax code is adjusted, and you repay the tax through your payslip each month – eating into your take-home pay."

Laura Suter from AJ Bell has highlighted some smart moves to counter the taxman's grip on your savings. She said: "You can organise your savings and dodge some sneaky tax traps to avoid being landed with an unexpected tax bill next year."

She also warns savers that although the Personal Savings Allowance is a boon for many, its unaltered thresholds since inception mean some may inadvertently face hefty tax burdens. . For basic-rate taxpayers, up to £1,000 in interest remains tax-free, while higher-rate taxpayers enjoy a £500 allowance - additional-rate taxpayers are afforded no such cushion.

With interest rates occasionally leaping beyond 5%, unwary savers with heavy deposits could easily cross their allowance limits unnoticed, thus accruing significant taxable sums. Suter rings the alarm bell, cautioning: "Lots of people may have racked up a hefty tax bill already this year because they didn't realise they'd breached their Personal Savings Allowance."

However, all is not doom and gloom as she advises taking advantage of the new tax year in April for a clean slate, but stresses the importance of immediate action. She said: "If you have large savings outside an ISA, you'll need to get started now to use up the current tax year's allowances."

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Ms Suter has highlighted a financial oversight that's costing savers dearly, pointing out that since the Personal Savings Allowance came into play, ISAs have been largely ignored. Yet now, savers are feeling the pinch as they struggle to shift their hefty savings into an ISA without breaching the annual £20,000 tax-free limit.

She advised: "The annual ISA limit of £20,000 is generous, but if you've spent years accumulating savings outside of an ISA, you might find you hit that limit pretty quickly when you want to transfer your money into the tax-efficient account." She also suggested savvy moves for couples, saying: "If you have an ISA allowance remaining this tax year, consider whether you should move some cash into an ISA.

"Equally, if you have a partner, you could split the cash savings between you to use up both ISA allowances. If your partner pays income tax at a lower rate, it might make sense to move any savings that will attract tax into their name. Just make sure the savings interest doesn't tip them into the next tax bracket and undo all your good organising work."