Millions of savers are being urged to take full advantage of the current £20,000 Cash ISA allowance before planned HMRC reforms take effect. New data from the Bank of England reveals that savers deposited £3.1 billion into Cash ISAs in May, following a £12 billion surge in April, indicating many are acting early in anticipation of changes expected from April 2027.
Proposed Changes to the Cash ISA Allowance
Under the proposed reforms, the annual Cash ISA allowance for adults aged between 18 and 64 is set to fall from £20,000 to £12,000. Further changes affecting the taxation of savings held outside tax-efficient accounts are also expected. The government has announced these reforms as part of broader efforts to adjust tax policy.
The Bank of England's latest Money and Credit data also showed that total deposits at banks and building societies rose by £5.4 billion during May. Additionally, savers are increasingly locking their money into fixed-rate accounts. Deposits into fixed-rate savings products increased by £1.3 billion during May, while £2 billion was withdrawn from easy-access accounts as people sought better returns.
Expert Advice: Act Now
Andy Wood, tax expert at Tax Barrister UK, commented on the figures: "Whenever people know tax rules are going to become less favourable, it's common to see a rush to take advantage of the existing allowances while they still can. For anyone who has the means to do so, the current £20,000 Cash ISA allowance represents an opportunity that may not be available again once the changes come into force next April."
Wood advised savers not to wait until the end of the tax year to review their finances. "Many people leave tax planning until the end of the tax year, but this is one of those occasions where planning ahead could make a real difference," he said. "If you have significant cash savings, it's worth reviewing whether you're making full use of available tax-efficient allowances and whether your savings are still held in the most appropriate accounts for your circumstances."
Interest Rate Trends
The average interest rate on newly opened fixed-rate savings accounts increased to 4.26%, up from 4.07% the previous month. Easy-access accounts remained far less competitive, with average rates of around 1.65%. This disparity has driven many savers to shift their funds into fixed-rate products to secure higher returns.
With the planned HMRC reforms approaching, experts believe many savers will continue taking advantage of this year's £20,000 Cash ISA allowance before it is reduced. The surge in deposits suggests that savers are heeding the warnings and acting proactively to protect their savings from future tax changes.
