Record ISA deposits amid allowance cut fears

The latest figures from the Bank of England have revealed a surge in cash ISA deposits, the sharpest increase ever recorded, and while March and April are typically strong months for ISA subscriptions, this year has seen an exceptional level of urgency.  

The numbers speak for themselves: in April 2025 over £14 billion was squirrelled away into these valuable tax-free cash ISA savings accounts – more than double the amount deposited in March.  Savers are moving fast, and the overriding reason appears to be concern that the current cash ISA allowance may be under threat.

While no formal proposals have been tabled, it would not be the first time that tax-efficient savings vehicles find themselves in the Treasury’s crosshairs. In times of fiscal tightening, generous allowances are often seen as an easy win. However, on this occasion, the reason that this change may be introduced is reported to be to try and encourage people to invest into UK investments and stock markets, rather than leave their money in cash. The overall ISA allowance of £20,000 is not to be reduced.

Savers appear to be acting pre-emptively, funnelling cash into ISAs while the current rules remain intact, hoping that any changes made will not be retrospective.

Cash ISAs important as higher rates use up Personal Savings Allowance 

The fact that interest rates are so much higher than they were a few years ago means that cash ISAs are useful for savers looking to keep their returns as tax efficient as possible. After years of ultra-low returns, many savers are now enjoying meaningful interest on their cash once again, with many cash ISAs offering an interest rate in excess of 4% — an attractive prospect when paired with the promise of tax-free returns. For taxpayers in particular, the ability to shield interest from HMRC has become more valuable as the Personal Savings Allowance (PSA) is quickly used up.

Whilst five years ago, when even some of the top interest rates were around just 1.5%, it would have taken a deposit of over £66,000 to breach the basic rate PSA of £1,000. Today, with interest rates of 4% or more, just £25,000 in a top savings account would produce more than £1,000. For higher rate taxpayers it’s just £12,500 as the allowance is halved to £500  

Although interest rates have fallen over the last six months in line with base rates, more people realise that it’s unlikely we’ll see interest rates heading back down to the bad old days, when really low interest rates meant that you could often ignore the tax impact on savings interest.

Check the small print before you commit 

It’s important, however, that savers don’t rush in without checking the finer details. It’s crucial to check what terms and conditions apply as many of the easy access cash ISAs include short-term bonuses which have a ‘sell by date’ and/or restricted access.  

In some cases, it might still be worth using taxable savings, especially if you’re not close to breaching your PSA. But with allowances under threat, many are rightly deciding that the long-term, tax-free shelter of an ISA is worth making the most of while they can.

Ultimately, while the rush to deposit into cash ISAs may be driven by anxiety about the allowance being reduced, it’s also a good reminder of the value of making the most of your tax-free allowances. Whether it’s a cash ISA or a stocks and shares one – or whether you put money into a pension - being as tax efficient as possible remains one of the simplest and most effective ways to protect your savings and investments.  

If you want to check that you are making the most of your tax allowances, why not speak to a TPO adviser and arrange a free initial consultation today.

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