UK savers put a record £103bn into ISAs amid fears of allowance cut
In the 2023-24 tax year, British households deposited a record £103 billion into Individual Savings Accounts (ISAs), according to HM Revenue & Customs figures, evidence of a surge of interest in low-risk, tax-efficient savings.
Much of the growth was in cash ISAs rather than stocks and shares. The number of cash ISA accounts rose by 2.1 million to almost 10 million, and deposits jumped by 67% to nearly £70 billion.
The trend has been characterised by observers as a “dash for cash.” As the HMRC report itself says, the rise in returns from savings “are likely to have increased the attractiveness of ISAs as a means to reduce savings income tax liabilities.”
Much of the urgency was stoked by speculation that the newly elected Labour government, and Chancellor Rachel Reeves, might impose a cap on the amount that could be held in cash within the overall £20,000 ISA annual allowance.
Rachael Griffin, a tax and financial planning expert at Quilter, said:
“These figures don’t yet capture the frenzy of cash ISA ‘stuffing’ in early 2024-25, when rumours swirled that the chancellor might slash the cash ISA allowance. Billions were hurriedly parked into cash.”
Still, Griffin warned the appeal of cash may not last:
“Rates are already starting to drift lower.”
Stocks & shares ISAs and LISA growth
In contrast to cash ISAs, uptake of stocks & shares ISAs grew more modestly: 283,000 new stocks & shares accounts were opened, bringing their total to 4.1 million, with about £31 billion invested.
Meanwhile, Lifetime ISAs (LISAs) saw strong growth. Usage rose by 28%, with a record £2.3 billion invested across nearly 1 million LISA accounts.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, commented:
“The LISA has an enormously important role in helping people to save for their first home or retirement.”
However, she also warned about early withdrawal penalties. The latest data show that more than £100 million was charged in early exits, up from £75 million a year earlier.
“The way the early exit penalty works is that it not only takes away the benefit of the government bonus but also a chunk of your own savings.”
What’s next for the cash-ISA cap?
The proposal to limit the portion of the ISA allowance that can be held in cash has been paused for now.
Policymakers argue that capping cash holdings could nudge savers toward stocks & shares ISAs, encouraging more productive investment. Critics, though, warn that many savers prefer the certainty of cash, especially in volatile markets.
Whether the cap returns, and how steep it might be, will be a key issue to watch in upcoming budget and fiscal announcements.