Record Number of Cash ISAs Amid Treasury’s Potential Changes
The number of cash ISAs currently available has reached an all-time high, coinciding with discussions within the Treasury about possibly eliminating or restricting these accounts in the upcoming Budget. As of early February, there are 582 cash ISA options on the market, according to data from Moneyfacts, marking the highest count since the company began tracking these accounts in February 2007.
This notable rise in available accounts comes as the Treasury contemplates measures to motivate Britons to invest more in financial markets, such as stocks, rather than relying solely on cash ISAs. The increase in account offerings aligns with a slight uptick in ISA rates, with the average easy access ISA rate rising to 3.05 percent, up from 3.03 percent the previous month—the first rise since August. However, rates have since dipped slightly to 3.04 percent following a recent cut in interest rates by the Bank of England.
Currently, individuals can invest up to £20,000 annually into an ISA, with all interest earned subsequently being tax-free. Typically, savers are subject to taxation at their marginal rate once their earnings exceed a certain threshold: £1,000 per year for basic rate taxpayers, £500 for higher rate taxpayers, and £0 for additional rate taxpayers. The two primary types of ISAs are cash ISAs and stocks and shares ISAs. The latter requires investments in the stock market or similar vehicles, potentially offering higher returns over time, albeit with increased risk and volatility.
Government Discussions and Industry Concerns
The government has not dismissed the idea of imposing new restrictions on cash ISAs. Ministers are expected to engage with investment firms in the coming months to explore ways to encourage more people to utilize their savings in a manner that fosters economic growth and provides higher returns for savers, as reported by The i Paper. However, no definitive policy changes are anticipated before the next Budget announcement in the autumn, with any adjustments likely to take effect from April 2026.
A Treasury spokesperson stated, “We aim to assist individuals in saving for their future objectives while enhancing financial resilience across the country. We continuously review all aspects of savings policy.”
Despite this, banks and building societies have voiced their opposition to altering cash ISAs. Tom Riley, director of retail products at Nationwide, remarked, “Cash ISAs not only facilitate efficient savings for ordinary people but also enable us to support first-time buyer lending. While we believe the cash ISA allowance should remain unchanged, we welcome opportunities to simplify ISAs and align them with savers’ needs.” He suggested the possibility of adding an additional allowance to the existing £20,000 ISA limit specifically for stock and shares investments.
Chris Irwin, director of savings at Yorkshire Building Society, echoed these concerns, stating that eliminating cash ISAs would likely harm many individuals’ financial well-being and increase their tax burden.
Rising Cash ISA Rates Over Recent Years
Over the past two years, cash ISA rates have significantly outperformed historical rates from the previous decade. Traditionally, cash ISAs have offered lower rates compared to standard savings accounts, but currently, many savers can find better returns in cash ISAs than in other types of cash accounts, even before considering tax implications.
For instance, Plum offers a cash ISA with a competitive interest rate of 5.05 percent, allowing three withdrawals per year, while Trading 212 provides an account with a 5.03 percent rate that permits unlimited withdrawals. In contrast, no traditional savings account offers returns exceeding 5 percent.
Many savers may be keen to maximize contributions to cash ISAs before the end of the current tax year in April, as the £20,000 allowance for 2024-25 will not roll over if unused. Rachel Springall, a finance expert at Moneyfacts, noted, “Savers may feel optimistic with the record selection of cash ISAs available this season. As the end of the 2024-25 tax year approaches, it is crucial for savers to fully utilize their ISA allowances, especially since providers are striving to enhance competition to attract deposits.”
She added that while it is encouraging to see rates rise across the savings spectrum since early 2025, any celebration might be tempered by anticipated cuts in savings rates due to a decrease in the Bank of England’s base rate and declining swap rates.
