HMRC increases scrutiny on savings interest for joint accounts as thresholds bite

Tax on savings interest in the United Kingdom is rising for more savers, with government data showing a sharp uptick in taxpayers hit by savings tax in 2025-26. Four times as many people will pay tax on the interest they earn in their savings accounts this year compared with 2021-22, according to figures from HM Revenue & Customs. The total burden is projected to reach about 2.64 million people, with roughly £2.5 billion of the tax take coming from pensioners as frozen thresholds pull more households into the net. The trend matters for households that rely primarily on savings for income, including couples with joint accounts and dwindling pension-age relief.

When the interest from a joint savings account is earned, HMRC generally splits the amount equally between the account holders, and each person pays tax on half of the interest at their own marginal rate. This 50/50 assumption holds even if one partner contributed more money to the account. Two advisers described how that allocation interacts with personal savings allowances and the starting-rate for savings.

In basic terms, each individual has a Personal Savings Allowance, which is £1,000 for basic-rate taxpayers and £500 for higher-rate taxpayers. In addition to the PSA, there is a starting-rate for savings, which can allow up to £5,000 of savings interest to be earned at a zero or very low rate if you have little other income. The exact taxation hinges on whether one partner’s NHS income is counted as net or gross, and on the total amount of savings interest earned. Based on the limited information provided for a hypothetical couple, the partner receiving the NHS pension could be taxed at 20 percent or 40 percent on interest once their PSA is used, and the other partner could benefit from the PSA and the starting-rate depending on income. It would appear that the non-pensioner partner could utilise the full £1,000 PSA and—before any state pension begins—could also access the starting-rate for savings up to £5,000 in a year. As state pension and other income rise, the availability of these allowances can shift further.

HMRC typically collects any tax on savings interest automatically by adjusting a taxpayer’s tax code within the PAYE system. Banks report the interest to HMRC, so no action is required to trigger this collection. For savers who prefer to avoid tax on interest altogether, cash ISAs provide a straightforward path. Each person can contribute up to £20,000 per year into a cash ISA, and the interest earned inside it is tax-free. Experts emphasize sheltering as much savings as possible inside ISAs, while remaining mindful of eligibility and overall financial planning.

Shaun Moore, a tax and financial planning expert at a wealth management firm, notes that HMRC usually assumes that joint savings held by spouses are split 50/50 unless there is clear evidence of a different entitlement. If a couple can demonstrate that one partner receives a larger share of the interest, they may be taxed accordingly, but providing credible evidence is essential. In the scenario described by readers, the higher-earning spouse’s share of interest could push them into a higher tax bracket, while the lower-earning spouse may be able to utilise the full starting-rate for savings and their PSA. In practice, this means that a strategy of allocating more savings income to the lower-earning spouse could reduce overall tax, but it must be formalised with proper documentation and agreement.

Another option cited by advisers is to hold savings in the name of the lower-income spouse. This can simplify tax planning, but it requires both partners to be comfortable with the change in ownership and the associated implications for control and access. In all cases, couples should review how their savings are titled and whether shifting ownership could optimise tax outcomes without compromising financial goals.

The practical takeaway for many households is to balance tax efficiency with liquidity and risk tolerance. While ISAs offer a convenient shield for interest, they come with annual and personal allowance limits that may not fit every savings need. For those who rely on a mix of income from savings and pensions, a tailored approach—potentially combining a larger ISA share with a carefully allocated joint account—can help minimise tax while preserving flexibility. For couples navigating these questions, consulting a financial adviser can help ensure compliance with current rules and alignment with long-term goals.

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In summary, the tax landscape for savings is tightening, and joint accounts add an extra layer of planning. The 50/50 default split, the PSA, and the starting-rate for savings collectively shape whether a couple will pay tax on interest and how much. By considering who holds what portion of savings, leveraging ISAs, and confirming entitlement with documentation when necessary, households can navigate these rules with a view toward preserving income from their savings during retirement and beyond. While the subject can be complex, staying informed and seeking professional guidance can help couples optimise their tax position within the framework of HMRC’s current policies.

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