British households saved £2.79 billion in tax on savings interest in the 2024-25 tax year through Cash ISAs, more than double the £1.3 billion claimed in 2023-24 and 13 times the amount six years earlier, according to data released by HM Revenue and Customs and obtained by stockbroker AJ Bell.
Two structural factors collided to drive the surge. Interest rates on top savings accounts climbed above 4 percent, with some reaching 5 percent or higher, amplifying the after-tax value of tax-free shelter. Simultaneously, income tax thresholds frozen since 2021 pushed wage earners into higher marginal rates as pay increased, shrinking or eliminating their £1,000 annual tax-free savings allowance for basic-rate taxpayers and £500 for higher-rate payers.
Cash ISAs sidestep this entirely, offering complete tax exemption on all interest earned. The contrast sharpened the incentive to shelter savings there rather than in standard accounts. In 2021-22, when rates were depressed and allowances still had room, savers claimed only £75 million in tax relief. The subsequent rate cycle changed the calculus entirely.
The tax arbitrage window is closing. Former Chancellor Rachel Reeves announced a cut to the maximum Cash ISA allowance from £20,000 to £12,000, effective April 2027. Savers are front-loading contributions ahead of the reduction. In April 2026 alone, £12 billion flowed into Cash ISAs as annual allowances reset.
Broad cash ISA inflows reflect the urgency. A total of £83.2 billion entered Cash ISAs since the start of 2024, the fastest pace since the pandemic. The rush will likely sustain through the 2026-27 tax year, after which the lower £12,000 cap will constrain new deposit growth and reduce marginal tax relief per saver.
