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Savers Flock to Cash Isas as Tax-Free Limit Threatened
31 Jan
Summary
- Record £57 billion poured into cash Isas in 2025.
- Allowance cut to £12,000 for under 65s from April 2027.
- Rising interest rates drive savers to seek tax shelter.
Cash Isa inflows reached an unprecedented £57 billion in 2025, marking a decade-high as savers responded to speculation about a potential reduction in the annual £20,000 tax-free allowance.
This surge contrasts sharply with 2022, when £1.1 billion was withdrawn. The shift is attributed to rising interest rates and a decade-long freeze on the Personal Savings Allowance, which now subjects more savers to tax on their earnings.
Official data from the Bank of England confirms December 2025 saw a record £5.2 billion in cash Isa inflows for a non-tax year end month. This trend is expected to continue as the new allowance limit approaches.
From April 2027, the cash Isa allowance will be reduced to £12,000 per year for individuals under 65, a measure aimed at encouraging investment. Savers over 65 will continue to benefit from the £20,000 allowance.
Experts anticipate a continued influx of funds into cash Isas as the deadline for the allowance reduction approaches. This strategy by savers may counter the government's objective of diverting funds into the stock market.
