Cash ISAs saved £2.1 billion in taxes recently

Savers who use cash ISAs saved a total of £2.1 billion in taxes during the 2023-2024 tax year. This information comes from a report by AJ Bell, based on data from a request made to HMRC. In comparison, those investing in stocks and shares ISAs saved £5.6 billion in taxes. On average, cash ISA holders saved £114 in taxes annually, while stocks and shares ISA savers saved about £721 each year. Laith Khalaf, from AJ Bell, noted that rising interest rates and frozen tax thresholds have increased the value of these tax shelters. He added that changes to dividend and capital gains tax allowances have also contributed to this trend. Concerns have risen regarding potential changes to cash ISAs. Chancellor Rachel Reeves has faced criticism for considering reducing the £20,000 annual tax-free limit or even scrapping cash ISAs altogether. A new limit of £4,000 has been suggested. However, these proposals will not be announced during the upcoming Spring Statement. Treasury officials indicated that the Chancellor is still reviewing these changes, which may include limits on contributions to cash ISAs. Khalaf emphasized the growing importance of ISAs for savers. He stated that rising interest rates have made it more likely for people to owe tax on their savings. Those who invested in cash ISAs managed to save over £2 billion in taxes last year, showcasing the significant benefits of tax protection in this type of savings account.