Cash ISA deposits increase amid fears that the allowance will be slashed

More than £6.3 billion was deposited into cash ISAs in March 2025, the latest figures from the Bank of England show. This sharp rise, up from just under £4 billion in February illustrates the ongoing value that cash ISAs offer to savers.

March is always a key month for ISA deposits as people scramble to make use of their ISA allowance before the end of the tax year. This year’s spike however is particularly notable, likely driven by speculation that chancellor Rachel Reeves may cut the cash ISA annual allowance to as little as £4,000 – from its current level of £20,000, in a bid to encourage people to invest their money, rather than leaving it in cash.  

No changes were announced in the recent Spring Statement which has only intensified cash ISA activity. Many savers are now rushing to use their allowance as soon as possible, in the hope that any future changes will not be applied retrospectively.

The impact of rising interest rates 

Another key reason for the ongoing popularity of the cash ISA is because savers are paying more interest on their savings, given that interest rates are far higher than they were. In April 2016, the Personal Savings Allowance (PSA) was introduced.  All basic and higher rate taxpayers have a PSA - £1,000 a year and £500 a year respectively – which means that they can earn up to this amount in interest on their cash savings, before paying any tax. Additional rate taxpayers do not have a PSA. When the PSA was introduced, interest rates were a fraction of what they are today, so savers are now fully utilising their PSA with smaller deposits.  

Back in April 2016, a top 1-year bond was paying 1.90% - so it would have taken a deposit of £52,600 to pretty much use up the basic rate PSA. Today with the top 1-year bond paying 4.55% just £22,000 will produce £1,000 in interest.

So, cash ISAs have become more and more popular.

We’ll have to wait and see what the fate of the cash ISA will be – in the meantime, it makes sense to use your allowance as soon as possible, especially if you pay tax on your savings. 

Check out our Best Buy tables here. 

As a final thought – instead of reducing the cash ISA allowance, why not encourage those who collectively have over £900 billion deposited in taxable easy access accounts, much of which will be earning less than inflation, to move that money into investments that could help them to earn more in the longer term?  

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This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions.

The opinions shared in this article are solely those of the individual and they do not necessarily reflect those of The Private Office.

The Financial Conduct Authority (FCA) does not regulate cash flow planning, estate planning, tax or trust advice.