Savers plough a “staggering” £12 billion into ISAs in April

Individuals continue to make the most of their tax-free cash ISA allowance before the changes come into effect from April 2027.

Cash ISAs remain popular among savers, as they deposited an additional £12 billion into these tax-free savings accounts in April 2026, according to the latest Bank of England Money and Credit report.

This is only slightly lower than the record-high sum of £13.1 billion that was added to cash ISAs in April 2025.

“Savers rushed to plough a staggering amount of money into ISAs during April, to protect their hard-earned cash from tax,” Rachel Springall, Finance Expert at Moneyfactscompare.co.uk, noted.

The data also showed that £13.1 billion was withdrawn from easy access savings accounts in April, and much of this may have been moved into cash ISAs. This indicates that many savers are making sure that their savings pots are as tax-efficient as possible so they can maximise the return on their money.

With April marking the start of the tax-year, it’s not unusual to see ISA deposits spike in this month. Indeed, Springall points out that April has been “the peak month for ISA deposits” since 2023 as savers rush to use up any of their remaining ISA allowance or make the most of their newly refreshed limit.

Preparing for the cash ISA allowance cut

This April brought some added urgency for savers aged under 65, as the 2026/27 tax-year is the last year they will be able to deposit up to £20,000 into cash ISAs. From the 2027/28 tax-year, the annual cash ISA allowance for these savers will drop to £12,000 (but will remain at £20,000 for those aged over 65).

“The change is an attempt to encourage savers to invest in a stocks and shares ISA,” Springall explained. However, while she says that investing could “be a better choice over the longer term” and offer the potential of greater returns, it’s important that “no one should feel forced to invest”.

Returns on a stocks and shares ISA depend on the performance of investments, so there’s a chance that you could get back less than you invest (unlike cash ISAs). As a result, the lowering of the cash ISA allowance may not be enough to persuade more risk-averse savers to invest, as these individuals may prefer to keep their money somewhere safer, such as traditional savings accounts.

However, savers may need to pay tax on the interest earned on a standard savings account. And, in a further blow, the amount of tax charged on savings interest is rising by two percentage points from the 2027/28 tax-year. For basic-rate taxpayers, this means they will be charged 22% in tax, while those in the higher-rate tax band will be charged 42%.

While the Personal Savings Allowance (PSA) means basic-rate taxpayers can earn up to £1,000 in savings interest per year tax-free (dropping to £500 for higher-rate taxpayers), anything they earn above this limit may be subject to income tax. Additional-rate taxpayers don’t have a PSA so will need to pay tax on any savings interest earned.

Are you getting a competitive return on your ISA?

Whether you will be affected by the upcoming cash ISA allowance changes or not, it’s crucial to be proactive about reviewing your accounts, particularly as higher inflation threatens to eat away at the real return on our savings.

Once you’ve put money into an ISA to protect it from tax, the work doesn’t stop there. If you leave money sitting in the same ISA for several years, you may find it pays a much lower interest rate than the current market-leading accounts, meaning you could be missing out on a significant amount of interest.

Instead, by regularly comparing the interest rates of your existing ISAs to the rest of the market and, if possible, switching to a higher-paying account, you can ensure you’re receiving a competitive return on your money.

When moving money between ISAs, make sure you follow the ISA transfer process to protect the tax-free status of your cash.

“The bustle of ISA season may have been and gone, but there are still some highly attractive rates paying more than 4% on cash ISAs on offer. Interest rates are expected to stay higher for longer, so it’s well worth comparing older pots and making the switch,” Springall urged.