The amount of money invested into cash Isas so far this tax year has increased by more than a fifth (22%) compared to the previous tax year.
This is according to Hargreaves Lansdown, which reported £3.8bn was paid into cash Isas in July, taking the total so far this tax year to £23.7b.
Hargreaves Lansdown head of active savings Mark Hicks attributed this to the perception that chancellor Rachel Reeves will use the Autumn Budget to raise taxes.
Reeves has refused to rule out inheritance and capital gains tax rises after prime minister Sir Keir Starmer warned the Autumn Budget will be “painful”.
Hicks said: “Tax is on everyone’s mind as the Budget lurks around the corner, and savers are snapping up cash Isas to escape an unnecessary tax bill on their savings. We’re highly likely to see more of the same as the 30 October approaches, and with cash Isa rates so competitive, savers don’t have to pay a price for this protection.”
Regardless of what the Autumn budget may bring, Hicks said that “cash Isas remain incredibly popular” and that Hargreaves Lansdown data “shows this trend is likely to continue over the next few months as we get closer to the Budget announcement”.
In November 2023, Hargreaves Lansdown Active Savings became the first cash savings platform to launch fixed-term cash Isas.
The products will sit alongside existing easy access and limited access options. This means clients can now spread their cash Isa allowance across multiple products.
The Isas are provided by Coventry Building Society. They offer clients a one-year rate of 4.8%, tax-free.
However, even before the fear of possible tax rises, cash Isas were attracting a strong level of investment.
Cash Isas saw the largest inflows for the start of the tax year in 2023 since Isas were launched in 1999.
AJ Bell and Bank of England research found that in the first three months of 2023 tax year, savers have put more than £9bn of money in cash Isas.
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