UK Households Pour Record Cash Into Isas Amid Fears Over Allowance Cuts

British savers have injected a record-breaking £103bn into individual savings accounts over the 2023-24 tax year, highlighting the nation’s preference for the certainty of cash in uncertain economic times. According to the latest HM Revenue and Customs figures, 15 million new Isas were opened during the period – a substantial leap from 12.4 million the previous year, marking the highest activity levels in over a decade.

This surge was overwhelmingly driven by cash Isas, with their numbers swelling by 2.1 million to just under 10 million active accounts. The value held in cash Isas rose by 67 percent, reaching almost £70bn. Analysts point to improved savings rates as a key factor in this trend, offering households an attractive method to shelter income from tax. Meanwhile, stocks and shares Isas also gained momentum, rising to 4.1 million accounts with a total of £31bn invested, up by 283,000 accounts on the previous year.

Market speculation around potential caps on cash Isas, after Labour’s return to government, fuelled a rush of last-minute deposits. Although the proposed restriction on the £20,000 annual Isa allowance has now been paused, rumours alone sent savers hurrying to make the most of tax-free opportunities while they lasted.

Attention has also turned to the growing popularity of lifetime Isas. These accounts, which help people save for a first home or retirement, saw usage rise by 28 percent to almost 1 million, with an all-time high of £2.3bn invested. Lifetime Isas come with a generous government bonus, yet the strict rules around early withdrawal have led to savers incurring over £100m in penalties in the last year. With the withdrawal charge set at 25 percent, those accessing funds for reasons outside of a house purchase or retirement risk not only forfeiting the government top-up but also losing part of their own savings.

Industry experts note that while cash Isa rates are beginning to drift lower, the recent surge may prove short lived unless further policy changes reignite demand. For now, British savers have made their priorities clear, stuffing record amounts into Isas and seeking safety from tax and market uncertainty alike.