Savers have been rushing to stash money in cash ISAs as the future of the tax-free accounts remains under threat with Chancellor Rachel Reeves reportedly considering reducing the annual savings limit on cash ISAs to £4,000.
According to the Bank of England savers deposited £3.6 billion into Cash ISAs in February compared to £3.2 billion in January. Rates on cash ISAs are expected to fall following the Bank of England’s decision to cut rates in February, with typical variable Cash ISA rates now around 1.8%, compared to a peak of 3.4% in October 2023.
Savers wanting to use their annual allowance before 5 April are being told that now may be a good time to open a cash ISA.
Pete Mugleston, mortgage adviser and managing director Online Mortgage Advisor said: “Now is often a smart time to act, especially in the run-up to the new tax year. Providers are keen to attract new business before the April 5th deadline, so we typically see more competitive rates and offers—particularly for ISAs and investment products.
Mugleston said waiting until later in the year might mean missing out on these early incentives.
“Plus, using your full allowance sooner gives your money more time to grow tax-free. While timing depends on individual goals, from a returns and allowance-maximising perspective, acting now often puts you in a stronger position.”
Colin Low, managing director at Kingsfleet said if a cash ISA is right for the saver, there are three reasons why you need to do it now.
He said: “One. The tax year ends this week – use it or lose it!.Two. There is a possibility that cash ISA annual limits may be reduced soon and three is that rates are holding up and there are still some great one and two year fixed rates available if you have the capacity to lock up the funds for the medium term.”
Riz Malik, independent financial adviser at R3 Wealth agreed that lenders often ramp up marketing around the tax year end to attract new business. “But the real advantage lies in acting early. By making your ISA contribution at the start of the new tax year, your money has more time to grow tax efficiently.”
