Cash Isa boom: Savers pour £70bn into cash Isas in 2023/24 as policy scrutiny grows

Savers ploughed £70 billion into cash Isas in the 2023/24 tax year, official HM Revenue & Customs data show. An extra £28 billion flowed into cash Isas in 2023/24 compared with the year before — a 67% year-on-year rise. The figures cover the period to April 2024, before Labour took power.

Cash Isas were opened by 9.9 million savers, the highest number in eight years, while about 4 million stocks and shares Isas were opened. In total, around 15 million people put £103 billion into Isa products, including cash Isas, stocks and shares Isas, Lifetime Isas and Innovative Finance Isas.

Total assets sheltered from taxation in Isas now stands at £872 billion at the end of the 2023/24 tax year, of which £360 billion is in cash.

As interest rates rose, savers leaned on cash Isas to shield their savings from tax. Savers can put up to £20,000 a year into cash Isas with all the interest earned on savings tax-free. The Personal Savings Allowance, the amount of interest that can be received each year before tax is owed, has withered in real terms, having been frozen since inception in April 2016 at £1,000 for basic rate taxpayers and £500 for higher rate taxpayers. Those subject to the 45% additional rate receive no PSA, meaning interest earned on cash savings held outside of an Isa is taxed.

But with the £70billion cash Isa boom come questions about whether too much money is being kept in cash. The spectre of the Budget in late November looms and all eyes will be on Chancellor Rachel Reeves who has a potential £50billion black hole in the nation’s finances to fill. Earlier this year, it emerged the Chancellor was considering cutting the cash Isa allowance to £4,000 or £5,000 in a bid to get cash savers investing in the stock market and boost the economy. A raid on cash Isas would also boost the £6billion the Treasury rakes in from tax on savings interest each year. The Chancellor was widely expected to announce plans to slash the £20,000 tax-free allowance in her Mansion House speech in July. These plans were put on hold after a furious backlash from savers over rumoured plans to slash the tax-free savings allowance and the Daily Mail and This is Money's Hands off Cash Isas campaign. But industry figures believe using Isas and other tax-friendly investments to boost the economy could still be on the Treasury's agenda.

Jason Hollands, a director of wealth manager Evelyn Partners says: 'For now, the Chancellor's plans to cut the cash Isa allowance have been put on "pause" but that does not mean reform of Isas is off-the-table completely for the remainder of this parliament.' It should be noted that several alumni of the Resolution Foundation, a think tank which has previously advocated capping Isas to £100,000 per person, are now in influential positions in the Government.

Elsa Littlewood, private wealth partner at advisory firm BDO says: 'For many years the cash Isa limit was half the current annual limit – in order to encourage equity investment it's not inconceivable that we will see a return to historic limits.'

Savers use Isas as a safe and reliable home for emergency savings, home deposits and retirement savings without having to pay tax on any interest earned. Hollands adds: 'As the tax environment is only likely to toughen in the near term given the hole in the public finances, those able to make use of Isas to protect wealth from taxation should do so as fully as possible.'

This is Money lists several cash Isa products, noting top rates and accounts that come without catches to trip savers up. It highlights products such as Trading 212 Easy Access at 4.38%, Cynergy Bank Easy Access at 4.35%, Vida Savings one-year fix at 4.31% and United Trust Bank two-year fix at 4.22%.

Readers should note that This is Money’s five-of-the-best cash Isas guide contains affiliate disclosures: if a reader opens an account via an asterisked link, This is Money may earn a commission. The article frames cash Isas as a tax-efficient tool for savers and emphasizes rates and terms that may change over time.