According to HMRC data for the 2023/24 tax year, subscriptions to cash ISAs have surged, growing approximately 224% more than those to stocks and shares ISAs by the end of the decade.
Source HMRC
The Chancellor has long considered reforms to individual savings accounts (ISAs) aimed at “improving returns for savers.” Rachel Reeves’s proposed changes are widely expected to involve reducing the current £20,000 annual subscription limit specifically for cash ISAs. This idea has received support from the investment management sector, while major banks and the Building Societies Association have voiced strong opposition.
New statistics released by HMRC in September have added fresh perspective to the debate. In 2023/24, cash ISA subscriptions totalled £69.5 billion, compared to just over £31 billion for stocks and shares ISAs. As of April 2024, the total invested in cash ISAs reached £360 billion, and it’s reasonable to assume that figure now exceeds £400 billion.
From the Chancellor’s viewpoint, this presents a significant tax consideration. If the Bank of England were earning 4% interest on £400 billion, that would equate to £16 billion in interest income, none of which is subject to income tax. HMRC estimates that the cost of income and capital gains tax relief on ISAs reached £9.4 billion in 2024/25, a nearly 20% increase from the previous year. Reducing the flow into cash ISAs could help curb this tax loss, even if the public narrative focuses on boosting returns.
To be fair, the Chancellor’s argument has some merit. HMRC’s data shows that over the decade to April 2024, the total value of stocks and shares ISAs grew faster than cash ISAs. However, cash ISAs saw minimal net inflows for much of that period. It’s easy to forget that the Bank of England’s base rate remained below 1% from February 2009 to June 2022, resulting in poor returns on cash deposits.
Before rushing to open a cash ISA ahead of the Budget, consider your financial goals. If you’re simply looking to shelter a cash deposit from tax, remember that unless you’re an additional or top-rate taxpayer, the Personal Savings Allowance (PSA) already covers up to £200 of tax on interest, £1,000 for basic-rate taxpayers and £500 for higher-rate taxpayers.
If your goal is long-term growth, as the Chancellor suggests, other options may be more suitable. Investing in shares should be viewed as a long-term strategy and should align with your risk tolerance and financial situation.
While ISAs offer tax advantages, no personal tax on income or gains, investments can fluctuate in value, and returns are not guaranteed. Stocks and shares ISAs may also incur unrecoverable tax on income received by ISA managers. These ISAs typically invest in corporate bonds, equities, and other variable assets.
Tax treatment depends on individual circumstances and may change over time. Note that the Financial Conduct Authority does not regulate tax advice.
21st November 2025
