Time to join the cash ISA rush?

June saw a continued surge in the popularity of cash Individual Savings Accounts (ISAs) as savers deposited a staggering £3.4 billion into these tax-free accounts, according to the latest data from the Bank of England.

This uptick in interest follows a record-breaking £4.2 billion funnelled into ISAs in May – the highest for the month since the launch of the modern ISA 25 years ago.

The latest stats may seem surprising given the squeeze many of us feel, but it is clear that many taxpayers are keen to take full advantage of their ISA accounts.

To give some scale to this year’s ISA rush, in the initial three months of the 2024/25 tax year, proactive savers have accumulated nearly £20 billion in cash ISAs.

This represents a nearly 30 per cent increase from the £15.4 billion saved during the same period last year, highlighting a significant shift in saving behaviours.

The comparison with previous years is even more stark if you look at the Bank’s previous data. In June 2023, savers added £3.3 billion to their cash ISAs.

This is a complete turnaround from June 2022, when there was a net withdrawal of £139 million, and from June 2021, which saw a net reduction of £526 million.

The shifting trend is clear: there is a robust incentive for savers to maximise their allocations to cash ISAs.

This shift is partly driven by the potential tax liabilities on savings interest due to high interest rates and a frozen personal savings allowance.

With the personal savings allowance remaining static, higher interest earnings mean that more savers are likely to face tax bills on their savings interest.

With the evident rush towards cash ISAs as a preferred saving method, the question for savers remains: Is now the time to join the cash ISA rush?

For those looking to optimise their savings and potentially reduce their tax burden, the answer might very well be a resounding yes.

If you are yet to make full use of your ISA allowance for the current tax year, please speak to our team.