The UK's Individual Savings Account (ISA) market has seen a remarkable expansion, with total holdings now standing at £872 billion at the close of the 2023/24 tax year. This represents a 20.1% increase, one of the most significant annual expansions recorded for the tax-efficient savings wrapper.
Total subscriptions to Adult ISAs reached £103 billion in 2023/24, an increase of £31.4 billion compared to the previous year. This growth, as HMRC notes, is largely attributable to a renewed public appetite for Cash ISAs.
The Resurgence of Cash ISAs
Cash ISAs were the undisputed star performer in the last tax year, with subscriptions soaring by 67% year-on-year. This translates to an additional £27.9 billion flowing into these accounts, bringing the total subscribed to Cash ISAs to £69.5 billion. For context, Stocks & Shares ISAs attracted just over £31 billion in the same period.
The appeal is clear: nearly 10 million people now hold a Cash ISA, more than double the number opting for Stocks & Shares ISAs. Cash ISA subscriptions accounted for 66% of all ISA subscriptions in 2023/24. The average amount saved in a Cash ISA now stands at £26,900, with an average annual subscription of almost £7,000 per person.
This resurgence is not accidental. Expert analysis attributes it to a period of competitive rates, with many providers offering some of the highest Cash ISA interest deals in over a decade. This coincides with the Bank of England's Monetary Policy Committee holding the base rate at 3.75% as of April 30, 2026, a rate that has influenced the attractive returns on offer.
"Around £103 billion was subscribed to Adult ISAs in 2023 to 2024, an increase of £31.4 billion compared to 2022 to 2023. This increase was driven by the rise in cash ISA subscriptions, which grew by 67% (£27.9 billion)." – HMRC Annual Savings Statistics, September 2025
Stocks & Shares ISAs: Steady Growth
While Cash ISAs grabbed the headlines, Stocks & Shares ISAs also demonstrated positive momentum. Subscriptions rose by 10.9% in 2023/24, with 4.1 million accounts receiving new funds. The average deposit into a Stocks & Shares ISA was £7,594. Over the decade leading up to April 2024, the total value of Stocks & Shares ISAs has grown more rapidly than their cash counterparts, underscoring their long-term potential for capital appreciation.
The Taxman's Take: A Rising Cost
The increasing popularity of ISAs comes at a cost to the Exchequer. HMRC estimates the overall cost of ISA tax relief – covering both income tax and capital gains tax – will reach £9.4 billion in 2024/25, nearly 20% higher than the previous year. The value of tax relief specifically provided to Cash ISA savers has seen a dramatic leap, from £70 million in 2021–22 to £2.1 billion in 2023–24, a direct consequence of higher interest rates and increased savings.
Your Annual Allowance and Other Wrappers
The overall annual tax-free allowance for an adult ISA remains £20,000 for the 2024/25 and 2025/26 tax years, a limit confirmed to be frozen until 2030. This allowance can be split across different ISA types.
- Cash ISA: For tax-free savings.
- Stocks & Shares ISA: For tax-free investments in the market.
- Lifetime ISA (LISA): Specifically designed for first-time buyers or for retirement. You can contribute up to £4,000 per tax year, which counts towards your overall £20,000 allowance. The government adds a 25% bonus to your contributions, up to a maximum of £1,000 per year.
- Junior ISA (JISA): A separate allowance of £9,000 per tax year per child.
It's important to remember your Personal Savings Allowance (PSA). Basic rate taxpayers can earn up to £1,000 in interest tax-free each year, while higher rate taxpayers have a £500 allowance. Additional rate taxpayers receive no PSA. Any interest earned above these thresholds on standard savings accounts is subject to income tax. This is where ISAs, particularly Cash ISAs, become invaluable, as all interest earned within them is entirely tax-free, regardless of amount.
But There Are Risks: Future Changes on the Horizon
While Cash ISAs currently offer attractive tax-free returns, a significant policy shift is on the horizon. Chancellor Rachel Reeves, in the Autumn Budget 2025, confirmed her intention to reform ISAs to "improve returns for savers." Critically, she announced that the Cash ISA limit will be reduced to £12,000 a year from April 2027 for those aged under 65. The government's stated aim is to encourage more people to invest in stocks and shares instead.
This future reduction presents a strategic challenge for savers, particularly those who prefer the perceived safety of cash and rely on the full £20,000 Cash ISA allowance.
What this means for you
If you are currently holding significant savings outside of an ISA, particularly in a standard account earning interest, you may be inadvertently incurring a tax bill above your Personal Savings Allowance. The impending reduction of the Cash ISA limit also necessitates a review of long-term savings strategies.
Scenario: Maximising Your Savings
Consider a basic rate taxpayer with £20,000 saved at a 4% AER in a standard savings account. They would earn £800 in interest. This falls within their £1,000 Personal Savings Allowance, so no tax is due. However, if they had £30,000 at 4% AER, earning £1,200 interest, £200 would be taxable. Placing this £30,000 into a Cash ISA would mean all £1,200 interest is entirely tax-free. For a higher rate taxpayer, the tax-free interest threshold is much lower, making ISAs even more critical.
For first-time buyers, utilising a Lifetime ISA (LISA) is a compelling option. Contributing the maximum £4,000 per year means the government adds a £1,000 bonus, effectively giving you a 25% boost on your savings towards a first home or retirement.
Step-by-step: What to do right now
- Review Your Current Savings: Assess how much you have in standard savings accounts and the interest they are earning. Compare this to your Personal Savings Allowance.
- Consider ISA Options: Decide whether a Cash ISA, Stocks & Shares ISA, or a combination best suits your financial goals and risk tolerance. For first-time buyers under 40, a Lifetime ISA is often a strong choice.
- Check Current Rates: Shop around for the most competitive Cash ISA rates. The Bank of England base rate at 3.75% (as of April 30, 2026) means many providers are offering attractive AERs.
- Utilise Your Allowance: Aim to use your full £20,000 annual ISA allowance if possible, especially before the potential Cash ISA limit reduction in April 2027.
- Transfer Existing ISAs: If you have older ISAs earning poor rates, consider transferring them to a new provider offering better returns. Ensure you follow the correct ISA transfer process to maintain their tax-free status.
When Effective
The current £20,000 ISA allowance is effective for the 2024/25 and 2025/26 tax years. The proposed reduction of the Cash ISA limit to £12,000 for those under 65 is slated to take effect from April 2027.
Where to get help
For personalised guidance on your specific financial situation, it is advisable to consult an independent financial adviser. Many reputable organisations, such as the MoneyHelper service, also offer free, impartial advice on savings and investments.
Sources
- HMRC Annual Savings Statistics (September 2025) — Overall ISA market growth, increased subscriptions, dominance of Cash ISAs, number of ISA accounts, cost of ISA tax relief.
- Bank of England Monetary Policy Committee (April 30, 2026) — Base rate decision.
- Office for National Statistics (ONS) — Households' saving ratio (Q4 2025).
- Chancellor Rachel Reeves (Autumn Budget 2025) — Proposed Cash ISA limit reduction.
This is not financial advice. Seek independent financial guidance. Interest on standard accounts may be subject to tax above your Personal Savings Allowance.