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ISA savings rocket in rush to avoid lower £12k cash limit

Writer: Sara White
Sara White
11 minutes ago
2 min read
Sara White, Editor, Business & Accountancy Daily. Croner.
Sara White, Editor, Business & Accountancy Daily. Croner.

Cash ISA deposits hit record £95.5bn in a single year, up 37% as savers redirect money to tax free savings as endless threshold freeze bites.


With government plans to overhaul the ISA system from next April, reducing the current £20,000 savings threshold to £12,000 for cash only ISAs, latest figures from HMRC show that threats of change to the popular savings vehicles triggered a multibillion pound savings splurge in tax year 2024-25.


The stand out figure was a 37.5% increase in the amount of money put into Cash ISAs totalling £95.9bn in just 12 months, up £26.1bn on the previous year.


In total £135.7bn was saved in ISAs in 2024-25, including a 19.7% increase in stocks and shares ISAs. The overall figure was up £32.7bn, with more than two thirds driven by money being shovelled into cash ISAs.


Former chancellor Rachel Reeves overhauled ISA savings, with plans to shift the public towards stocks and shares ISAs, splitting the old £20,000 allowance 50/50 between cash and stocks. The stocks and shares option also comes with extra complexity, with the implications of ‘unused cash’ held in these ISAs liable for income tax at 22%.


When the decision was confirmed at the 2025 Budget, then chancellor said the change would encourage investment in the City and help drive the weak growth figures.


But whether this will work is not so certain as it adds undue complexity to a simple tax free savings wrapper, and with final guidance not yet released on the tax position, the appetite for the change is somewhat tempered due to the riskier aspects of saving in a stocks and shares vehicle.


In June, HMRC confirmed there would be a final consultation on the draft legislation, saying at the time it would happen in due course.


Sarah Coles, head of personal finance at AJ Bell, said: ‘The change in the allowance is creeping ever closer, so anyone who needs to protect big chunks of savings from tax should consider taking advantage ahead of the change.


‘In the five-year fixed rate market, you can match what’s on offer in the wider savings market (5.25%) with a Cash ISA, and easy access and other fixed rates are only fractionally less generous, so the maths is highly likely to stack up in favour of an ISA if you pay tax on your savings.’

 

Essentials - the ISA timeline







 
 
 

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