An additional £17.2 billion has been invested in Cash Isas in the last 12 months, compared to a year earlier
Savers put £4.2 billion into tax-free Isas in August, the latest data from the Bank of England shows.
It means savers put £17.2 billion more into cash Isas in the 12 months to August 2024 than they did in the same period in 2023.
Isa inflows increased by 51 percent in the 12 months to August 2024 compared to the same period in 2023.
Savers funneled £35.4 billion into Isas in the 12 months to August 2023, but in the 12 months to August 2024 Isa inflows reached £53.6 billion, This is Money analysis shows.
Bank of England data shows Isa inflows increased by £17 billion between the 12 months to August 2023 and the same period in 2024
What’s behind the £17 billion jump?
The £4.2 billion inflow into Isa in August 2024 actually marks a slowdown from August 2023, when savers poured £5.16 billion into Isas.
But earlier in the 2024/25 tax year, Isas received a record £12.3 billion in April, which helped fuel the 12-month increase.
There are two main factors behind the cash Isa boom: higher savings rates on regular accounts mean deposits of £20,000 are likely to exceed the personal savings allowance, and high cash Isa rates have also attracted savers.
Over the past eighteen months, savers have seen one of the highest savings rates in fifteen years.
According to interest rate monitor Moneyfacts Compare, the average easily accessible account now pays 3.08 percent interest.
But it does mean that millions of savers will now have to pay savings tax on their pots, possibly for the first time.
The number of people expected to pay tax on their savings interest will triple in three years.
Nearly 2.1 million people are expected to pay tax on their savings this year, compared to around 647,000 in the 2021/22 tax year, a Freedom of Information request from AJ Bell shows.
The number of people expected to pay savings tax rose to 1.1 million in the 2022/23 tax year and rose again to 1.9 million in the 2023/24 tax year. Data shows that nearly 2.1 million people could pay savings taxes in the current tax year
This is because the high interest rates on savings accounts will have led to many savers exceeding their Personal Savings Allowance (PSA).
> Best cash Isa rates: These are Money’s independent best buy tables
The PSA means basic rate taxpayers pay no tax on the first £1,000 of interest earned each year, while higher rate taxpayers get a £500 deduction. Taxpayers with an additional rate will not receive a PSA.
Despite its introduction in April 2016, PSA limits have not increased and interest rates are much higher.
When the PSA was introduced, the best one-year fixed rate bond on the market paid 1.91 per cent, so a basic rate taxpayer would have breached the £1,000 PSA with a £52,357 deposit.
Today the best one-year bond pays 5 per cent, so a basic rate taxpayer would exceed the fee by £20,050.
Similarly, the best easy access account available in April 2016 paid just 1.45 per cent – so the base rate PSA would have been breached with a deposit of around £69,000.
With the highest rates now paying 5 per cent, £20,000 would earn £1,000 in interest.
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