Savers bank on cash ISAs with pots up by £28billion

CASH is king again. Or rather, cash ISAs are. New figures show savers were already waking up to the benefits of the tax-free savings vehicle even before last year's general election.

- By Harvey Jones

For the first time in 13 years, the number of adults paying into either cash or stocks and shares ISAs topped 15 million in the 2023/24 tax year, according to HMRC's annual savings statistics. Almost 10 million people opted for the safety of a cash ISA rather than a higher-risk stocks and shares ISA, and the sums involved are staggering.

Savers poured almost £70billion into cash ISAs, up £28billion in a year. That's double the amount saved just two years earlier.

Laura Suter, director of personal finance at AJ Bell, said ISAs are firmly back in fashion as savers seek to shield their money from the taxman. The urge is likely to be even stronger as the next Labour Budget looms on November 26.

SURGE

Cash ISAs fell from grace in 2016, when the personal savings allowance (PSA) was launched. This allowed basic rate taxpayers to earn up to £1,000 in savings interest outside of an ISA each year without paying income tax. Higher-rate taxpayers could earn £500, while additional-rate taxpayers got nothing.

Given that ordinary savings accounts often paid more than cash ISAs, many switched. But the PSA limits have not risen since, reducing their real value, while frozen income tax thresholds have dragged millions into higher tax bands. More savers are now exceeding their PSA.