Savers stick extra £28bn into cash Isas compared to a year earlier – and that’s before rumours of a limit cut by Rachel Reeves

Savers ploughed £70billion into cash Isas in the 2023/24 tax year, official statistics from HM Revenue & Customs today show.  

An extra £28billion flowed into cash Isas in 2023/24 compared to the year before – a 67 per cent rise annually.  

It is more than double the amount paid in compared to just two years earlier. The figures take us up to April 2024, before Labour took power.

Cash Isas were believed to be in crosshairs of the current Chancellor, with rumours of a limit cut – and it means Isa pots have likely swelled even further since.  

But in a ringing endorsement for cash Isas, the nation paid money into 9.9million cash Isas, the highest number in eight years, while some 4million stocks & shares Isas were opened. 

In total, some 15million people stuck £103billion into Isas overall, including stocks and shares Isas, cash Isas, Lifetime Isas, and innovative Finance Isas. 

This is the highest number of Isas opened in 13 years and is up from 12.4million subscribers in the prior year. 

It means total assets sheltered from taxation in Isas now stands at £872billion at the end of the 2023/24 tax year, of which £360billion is in cash.

Isa stampede: Savers poured £70billion into cash Isas in the tax year 2023/24

As interest rates rose, more people funnelled money into tax-friendly cash Isas to shield their savings from the taxman. 

Savers can put up to £20,000 a year into cash Isas with all the interest earned on savings tax-free. 

The Personal Savings Allowance, the amount of interest that can be received each year before tax is owed, has withered in real terms, having been frozen since inception in April 2016 at £1,000 for basic rate taxpayers and £500 for higher rate taxpayers. 

Those subject to the 45 per cent additional rate receive no PSA, meaning interest earned on cash savings held outside of an Isa are subject to tax.

But with the £70billion cash Isa boom come questions about whether too much money is being kept in cash. 

The spectre of the Budget in late-November looms and all eyes will be on Chancellor Rachel Reeves who has a potential £50billion black hole in the nation’s finances to fill.

Earlier this year, it emerged the Chancellor was considering cutting the cash Isa allowance to £4,000 or £5,000 in a bid to get cash savers to start investing in the stock market and boost the economy. 

> Read more: The best stocks and shares Isas 

A raid on cash Isas would also boost the £6billion the Treasury rakes in from tax on savings interest each year.

The Chancellor was widely expected to announce plans to slash the £20,000 tax-free allowance in her Mansion House speech in July. 

These plans were put on hold after a furious backlash from savers over rumoured plans to slash the tax-free savings allowance and the Daily Mail and This is Money’s Hands off Cash Isas campaign.

But industry figures believe using Isas and other tax-friendly investments to boost the economy could still be on the Treasury’s agenda. 

Jason Hollands, a director of wealth manager Evelyn Partners says: ‘For now, it seems, the Chancellor’s plans to cut the cash Isa allowance have been put on “pause” but that does not mean reform of Isas is off-the-table completely for the remainder of this parliament. 

‘It should be noted that several alumni of the Resolution Foundation, a think tank which has previously advocated capping Isas to £100,000 per person, are now in influential positions in the Government.’

While Elsa Littlewood, private wealth partner at advisory firm BDO says: ‘For many years the cash Isa limit was half the current annual limit – in order to encourage equity investment it’s not inconceivable that we will see a return to historic limits.’

Savers use Isas as a safe and reliable home for emergency savings, home deposits and retirement savings without having to pay tax on any interest earned. 

Hollands adds: ‘As the tax environment is only likely to toughen in the near term given the hole in the public finances, those able to make use of Isas to protect wealth from taxation should do so as fully as possible.’