HMRC's sting in the tail for 1.16million pensioners facing income tax bombshell

More than one million pensioners could soon discover their supposedly "safe" nest-eggs come with a sting in the tail - an unwelcome tax bill from HMRC. According to Freedom of Information data obtained by AJ Bell, 1.16 million people over state pension age could soon be hit with income tax on the interest from their savings this year. That's nearly half of all 2.64 million taxpayers with a savings tax bill - and a sharp reminder that in today's world of frozen thresholds and higher interest rates, even your bank account can become a tax trap.

Pensioners make up a striking 44% of those affected, rising to almost two-thirds among basic-rate taxpayers. This shows it's now not only the comfortably off who are paying the price of higher interest. AJ Bell's senior pensions and savings expert Charlene Young explained that many people "may not realise" they have a tax bill coming, due to a lack of awareness about thresholds and how tax applies on income earned from a savings account.

The Personal Savings Allowance (PSA) lets basic-rate taxpayers earn £1,000 of interest in a savings account tax-free per year, and higher-rate taxpayers are allowed to earn up to £500. Additional rate taxpayers don't have an allowance.

If tax becomes payable on savings interest, it's charged at your usual rate of income tax - 0%, 20%, 40% or 45%.

Ms Young said: "This means the Government could come calling for 20p, 40p or even 45p from every pound your bank pays out."

There are a few things you can do to avoid a bill. Firstly, only withdraw pension cash when you really need it. Once it leaves the tax-sheltered pot, it's fair game for HMRC.

Secondly, keep cash inside an ISA (Individual Savings Account) instead, where you can currently shelter up to £20,000 a year and interest can grow tax-free.

Couples can join forces. Those who are married or are in a civil partnership can benefit from shared tax allowances. Move savings around between you to use both personal savings allowances up.

If you have the smaller pension income of under £12,570 a year, don't overlook the £5,000 "starting rate for savings". This can lift your total tax-free income to £18,570.

When it comes to your money, it's vital to be proactive rather than reactive, as even cautious savers can be caught off guard.

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"Our records indicate you could be owed up to £2,282.58 in mis-sold car finance". Have you received a text like this? Please don't click it, it's a scam.

How about, "You may be eligible for the winter fuel payment. Complete your application via this link". A vicious and opportunistic fraudster's behind that one too, targeting people they hope are vulnerable enough click a bogus link and hand over their personal details.

Scams are a global epidemic, and it's only getting worse. More sophisticated and more personal, and much harder to detect.

New research by Citizens Advice showed that more than seven million adults were scammed over the past year in the UK alone. Of those, one in five suffered severe financial and emotional consequences.

To assist the charity's campaign, an 83-year-old pensioner from the North-East shared her heart-rending story after being conned out of £40,000. She handed over her life savings and pension money before being pressured into taking out a five-year loan worth £30,000.

She said she was "pressured from the start" and didn't have a moment to think - a vital red flag, which only spells trouble.

To protect yourself, bear these crucial steps in mind. If you are contacted unexpectedly, particularly if they pressure you to transfer cash quickly, it's likely to be a scam. End the contact immediately.

Never share personal or security information such as passwords, pins or codes. Legitimate organisations will never ask for these details.

Be especially cautious if asked to pay for something in an unusual way, such as through gift cards or unfamiliar links. Remember if something appears too good to be true, it often is.

If in doubt, call Citizens Advice's consumer service helpline on 0808 223 1133 for guidance.