Cash ISAs have been in the news of late. Rumours began circulating early in the year that Rachel Reeves planned to cut the ISA Allowance. And while the chancellor stopped short of this in her Spring Statement, that didn’t stop an additional £4.2 billion from pouring into Cash ISAs before 6 April 2025. As reported by MoneyWeek, these figures represent a 31% year-on-year increase.
The chancellor did, though, use her statement to make clear the government’s commitment to “get the balance right between cash and equities [and] boost the culture of retail investment”.
More recently, Reeves told the BBC’s news podcast, Newscast, “I’m not going to reduce the limit of what people can put into an ISA, but I do want people to get better returns.”
You, too, will want the best possible returns on your ISA savings and investments.
Keep reading to find out more about how to make sure your money is working for you, and what future changes we might still see to the ISA landscape.
Cash ISAs are tax-efficient but there’s a limit on how much you can save
Cash ISAs are available to UK residents over the age of 18 and work similarly to regular savings accounts.
They’re tax-efficient, with no tax to pay on the interest you earn, but there is a limit to how much you can save. This is known as the ISA Allowance and stands at £20,000 for the 2025/26 tax year, spread across all the ISAs you hold.
Cash ISAs don’t hold the same level of risk as Stocks and Shares ISAs, but lower risk could be reflected in the returns you see.
Your ISA Allowance resets at the end of each tax year, and any allowance you haven’t used up is immediately lost. To make the most of your ISA’s tax efficiency, it makes sense to max out the allowance if you can afford to. And that might mean starting early.
Starting to save early in the tax year could make a significant difference by tax year end
In the financial sector, February to April is known as “ISA season”, as savers and investors make last-minute subscriptions to use up their ISA Allowance.
It isn’t always easy to find large sums in one go, and there’s more than one reason why having and investing earlier in the tax year might make financial sense.
Spreading payments throughout the year might make it easier to find the money. You can budget for regular payments each month, say, and either max out your allowance or pay up to an amount you can reasonably afford.
Making regular payments also starts to build your fund earlier in the year and means that you’re attracting interest for longer, and on a larger amount.
Cash ISAs are still in the firing line, so you might consider Stocks and Shares ISAs too
Despite the chancellor’s recent assurance that the £20,000 ISA Allowance will remain, her comments do leave room for the portion of that allowance assigned to Cash ISAs to be reduced.
Under current rules, you can use your allowance across all ISAs as you wish, aside from the Lifetime ISA, which has its own £4,000 limit. A similar limit for Cash ISAs could be in Rachel Reeves’ sights.
This could now be a good time to consider a move into Stock and Shares ISAs.
Like Cash ISAs, Stocks and Shares ISAs can be opened by UK residents over the age of 18. They are incredibly tax-efficient, with gains made free of Income Tax and Capital Gains Tax (CGT).
Stocks and Shares ISA invests in the stock market, which increases risk but also your chance of seeing meaningful returns. You’ll need to have a goal in mind that is at least 5 to 10 years away. And have a clear idea of your attitude to risk and capacity for loss.
As with Cash ISAs, investing as early in the year as possible could be financially beneficial.
You’ll begin to build a larger fund earlier in the year and take advantage of investment growth and compounding on your larger amount. You could also use regular payments to benefit from “pound-cost averaging”. This is essentially a smoothing out of market volatility, as you’ll buy some units when the markets are high and some when markets fall.
This averaging out over the year could reduce the impact on your portfolio of market volatility.
Contact us
Both Cash ISAs and Stocks and Shares ISAs are tax-efficient and could play an important role in your long-term financial plans.
Please email hello@globeifa.co.uk or call us on 020 8891 0711 to discuss how Globe IFA’s expert financial advisors can help you manage your long-term financial plans.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
The value of your investments (and any income from them) can go down as well as up, and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
