Cash ISA shake-up rumours spark rush to accounts in March

May 1, 2025

Rumours of Cash ISA allowance cuts sparked a rush to ISAs in March, whilst savers poured in £4.2 billion to the accounts – up 31% year-on-year

Laura Suter, director of personal finance at AJ Bell, comments on the latest Bank of England Money and Credit data:

“Rumours that the government was poised to slash Cash ISA allowances in the Spring Statement sparked a rush to the tax-free accounts, with savers putting £4.2 billion in Cash ISAs in March. There’s usually a spike in people stuffing their ISAs before the tax year end, but the speculation around changes to ISAs put the rockets under that this year. The money paid into Cash ISAs was 31% higher than March last year, with an extra £1 billion paid in by the British public.

“Data for the biggest month for Cash ISAs isn’t out yet, as April typically sees the biggest inflows, with savers rushing to pay money into their accounts in the final days before the deadline. Last year saw £11.5 billion paid into these accounts in April. If we saw the same 31% increase in cash paid in, that would take this April’s inflows to a whopping £15 billion. However, as the Spring Statement didn’t deliver any changes to Cash ISA allowances, that may have dampened some of the flows.

“Fortunately for the savers paying into their Cash ISAs, interest rates on the accounts rose around tax year end, despite expectations of a falling Bank of England base rate. It means that if savers hunted around for a decent rate they should be getting a solid return on their money. Data from Moneyfacts showed that at the end of March this year, easy-access ISA rates were higher than in April last year, although fixed rate ISA accounts were paying less.

“However, while the top rates on offer have risen, the average Cash ISA rate has been dropping, according to Bank of England data. The easy-access rate peaked in October 2023 at 3.4% and fell to 2% in March. It means that cash savers need to be savvy to hunt out the best rates, using comparison sites to pick an account with a top rate, rather than defaulting to their bank’s Cash ISA account. If savers don’t shop around they may well be losing out by plumping for an ISA rather than a standard taxable savings account, despite the free ride on tax.

“Cash ISAs have boomed in popularity in recent years, having been the forgotten account for years. They were chronically underused during the period of low interest rates, as the majority of people’s non-ISA savings were protected from tax by the personal savings allowance. However, the return of higher interest rates coupled with the freeze on income tax bands meant more people were paying tax on their savings – leading to many rediscovering Cash ISAs (see chart below).

“Some of these savers may be unnecessarily sticking to the safety of cash, when they could be investing their money instead. Our research shows that savers are paying the price for staying with safe havens, as Cash ISAs have lagged the returns of stock market funds since the ISA was launched in April 1999. The figures show that £1,000 saved every year in a Cash ISA since April 1999 when the product was launched, and earning the average Cash ISA rate over that almost 26-year period, would have turned into £34,392. However, if that same £1,000 a year was invested in the average return of the IA Global sector it would have turned the £26,000 investment into £83,603*.”