Millions of savers are missing out on top savings rates while others are being overcharged by the taxman amid chaos created by the Governments new rules on savings interest taxation, it has emerged.

On April 6 the Government introduced a new Personal Savings Allowance (PSA) under which 95pc of the population no longer have to pay tax on savings. 

On top of the annual £15,240 Individual Savings Account (Isa) limit, basic-rate taxpayers will be able to earn up to £1,000 from bank accounts tax-free. Higher-rate taxpayers will no longer pay tax on the first £500 they earn from bank accounts.

The policy was in part designed to save higher-rate taxpayers the hassle of filling out self-assessment forms to declare small amounts of savings income, but accountants say it has so far led to wild confusion and inaccuracies in peoples tax codes.