In the 2023-24 tax year, British households deposited a record £103 billion into tax-efficient Individual Savings Accounts (ISAs), with a noticeable preference for cash ISAs over stocks and shares versions. A total of 15 million ISAs were opened, increasing from 12.4 million the previous year, marking the highest level in 13 years. The demand particularly surged for cash ISAs, with nearly 10 million accounts holding almost £70 billion, reflecting a 67% rise in savings.
According to HM Revenue and Customs, this trend was influenced by increased returns on savings, which likely made ISAs more appealing as a tool for reducing tax liabilities on savings income. The anticipated changes by Chancellor Rachel Reeves to potentially cap cash ISAs under the £20,000 annual allowance may have also prompted a rush to save in these accounts.
While stocks and shares ISAs saw a smaller increase, with 4.1 million accounts holding £31 billion, the rising popularity of cash ISAs seems predominant. Recent reports indicate an uptick in the use of Lifetime ISAs (LISAs), with a 28% increase and £2.3 billion invested in almost 1 million accounts. These accounts offer government bonuses to aid savings for first homes or retirement.
However, the withdrawal penalties for LISAs have increased, with savers facing over £102 million in early exit charges, up from £75 million the previous year. This highlights concerns over the financial implications of early withdrawals, which can detract from the benefits of the government bonuses.
Overall, the data suggests a growing interest in both cash ISAs and LISAs, amid concerns about the sustainability of higher cash interest rates in the near future.
Source: https://www.theguardian.com/money/2025/sep/19/uk-isas-cash-tax-savings-accounts-allowance-cut