The total market value of Individual Savings Account (ISA) holdings in the UK surged to a record £872 billion at the end of the 2023/24 tax year, a substantial 20.1% increase in just twelve months. This unprecedented growth, detailed by HMRC, underscores the enduring appeal of tax-efficient savings vehicles in a period where inflation, at 2.8% in May 2026, continues to erode the purchasing power of unshielded cash.
Total subscriptions to Adult ISAs hit £103 billion in 2023/24, marking a £31.4 billion year-on-year increase and the highest annual figure ever recorded. Approximately 15 million Adult ISA accounts were subscribed to, a notable rise from 12.4 million the previous year, and the highest subscriber count since 2010/11. This suggests a renewed public focus on securing savings, perhaps driven by the Bank of England's base rate holding at 3.75% as of June 2026, making cash savings more attractive than in recent memory.
Cash Dominance and Future Shifts
Cash ISAs were the standout performer in 2023/24, with subscriptions jumping 67% year-on-year to £69.5 billion. This significantly outpaced the £31.1 billion subscribed into investment ISAs, with Cash ISAs accounting for more than 60% of all ISA subscriptions. The total amount saved in Cash ISAs reached £360 billion, with an average value of £26,900 per account. This trend highlights a preference for liquidity and perceived safety, even as Stocks & Shares ISAs also saw a respectable 10.9% rise in subscriptions.
However, the landscape for cash savings within ISAs is set for a significant overhaul from April 2027, as announced by HMRC following the 2025 Autumn Budget. These reforms introduce a nuanced approach to how cash is held and taxed within the ISA wrapper.
"From April 2027, the Cash ISA allowance would be reduced to £12,000 while the limit for Stocks and Shares and Innovative Finances ISA (non Cash ISAs) would remain at £20,000. The Cash ISA allowance for those aged 65 and over would remain at £20,000."
— HM Revenue & Customs
This means that while the overall £20,000 ISA allowance for the 2026/27 tax year remains unchanged, the allocation flexibility for cash will be curtailed for most savers from 2027. For those aged 65 and over, the full £20,000 Cash ISA allowance will be retained, a clear concession to a demographic often more reliant on fixed-income savings.
The New Cash Charge and Transfer Restrictions
Perhaps the most striking change is the introduction of a 22% charge on interest paid on cash held in non-Cash ISAs. This measure is intended to discourage long-term cash holdings within investment-focused wrappers, aligning with the basic rate of tax on savings from the 2027/28 tax year. ISA managers will be responsible for paying this charge to HMRC, meaning individuals will not need to declare this interest, and crucially, the Personal Savings Allowance (PSA) will not apply to this growth.
Transfer rules are also tightening. From 6 April 2027, there will be restrictions on transfers into Cash ISAs from non-Cash ISAs. However, transfers from a Cash ISA to a non-Cash ISA will remain possible, and transfers of Stocks & Shares ISAs to Cash ISAs will be permitted for those aged 65 and over.
What this means for you
If you currently hold significant cash within a Stocks & Shares ISA or Innovative Finance ISA, particularly if you are under 65, you will need to review your strategy before April 2027. Any interest earned on that cash will be subject to a 22% charge, effectively negating the tax-free status it previously enjoyed. Consider moving such cash into a dedicated Cash ISA, where interest remains tax-free up to the new £12,000 allowance (or £20,000 if over 65), or into a standard savings account if you are confident your interest income will remain below your Personal Savings Allowance (£1,000 for basic rate taxpayers, £500 for higher rate). For first-time buyers, the Lifetime ISA (LISA) remains a compelling option, offering a 25% government bonus on contributions up to £4,000 per year, though the government is consulting on its future design.
Scenario: The Impact of the 22% Charge
Consider a basic rate taxpayer under 65 holding £10,000 in cash within a Stocks & Shares ISA. If this cash earns 3% interest, that's £300 in interest. Currently, this is tax-free. From April 2027, a 22% charge would apply to this £300, resulting in a £66 deduction. This reduces the effective interest earned to £234, a clear departure from the previous tax-free benefit.
What to do right now
- Review Your Holdings: Examine how much cash you hold within any Stocks & Shares or Innovative Finance ISAs.
- Consider Your Age: If you are 65 or over, the new Cash ISA allowance of £20,000 remains, and the 22% charge on cash in non-Cash ISAs still applies.
- Plan for 2027: For cash held in non-Cash ISAs, decide whether to move it to a dedicated Cash ISA (up to the new £12,000 limit for under 65s), invest it, or move it to a standard savings account, being mindful of your Personal Savings Allowance.
- Explore Alternatives: For larger sums, always consider the tax-free benefits of Cash ISAs before opting for standard savings accounts, especially if your interest income is likely to exceed your Personal Savings Allowance.
- Lifetime ISA: If you're a first-time buyer under 40, continue to consider the Lifetime ISA for its 25% government bonus, up to £1,000 per year, on contributions up to £4,000.
When Effective
The new ISA reform measures, including the reduced Cash ISA allowance and the 22% charge on cash in non-Cash ISAs, are set to take effect from April 2027.
The Other Side: Government Rationale
The government's stated intention behind the 22% charge on cash in non-Cash ISAs is to discourage long-term cash holdings in products designed for investment. This aims to ensure that the tax benefits of investment ISAs are primarily utilised for growth through capital markets, while cash savings are channelled into dedicated Cash ISAs or standard accounts, where interest is subject to tax above the Personal Savings Allowance.
This is not financial advice. Seek independent financial guidance. Interest on standard accounts may be subject to tax above your Personal Savings Allowance.
Sources
- HM Revenue & Customs (HMRC) — ISA statistics for 2023/24 and 2027 ISA Reforms
- Bank of England — Monetary Policy Committee meeting, 18 June 2026 (Base Rate)
- Office for National Statistics (ONS) — Consumer Prices Index (CPI) May 2026
- Office for National Statistics (ONS) — Household Saving Ratio Q1 2026