People aren’t using their cash ISA allowance, a study found (Image: Getty)
A bank has issued an £8,129 alert to anyone with an ISA amid account changes coming in. According to research from Tesco Bank on average, cash ISA holders have only used just over £8,000 (£8,129) of their ISA allowance this current tax year, leaving more than £11,000 (£11,871) to use by April 2027.
40% of cash ISA savers said they are more likely to explore other cash savings options in the next financial year, for example fixed rate savings accounts. Major changes are coming in next year – the maximum amount savers aged 64 and under can put into a Cash ISA drops from £20,000 to £12,000 per tax year.
To use the full £20,000 limit, under-65s must put the remaining £8,000 into a Stocks & Shares or Innovative Finance ISA. Alternatively, they can invest the full £20,000 into a non-cash ISA. The research from Tesco suggests that people are not using their full allowance before the change comes in.
Tesco said: “Overall, those with cash ISAs are showing positive signs of active saving. 43% of cash ISA holders regularly save into their ISA, whether on a weekly or monthly basis. 50% say they contribute to their cash ISA from other savings accounts, therefore taking advantage of the tax efficiencies it offers. “
While one in ten (11%) cash ISA holders have not contributed anything to their ISA yet this year – a third (34%) have managed to put more than £10,000 in so far this financial year.”
The survey found a quarter (25%) of cash ISA holders see them as a good savings tool when it comes to managing their money, with a third (33%) of people with an ISA holding more than one account. This is an important reminder that you can open and pay into as many ISAs as you like, provided the holder doesn’t exceed their overall £20,000 a year limit.
As of April 2027, anyone under the age of 65 will no longer be able to save £20,000 every tax year into a cash ISA – this limit is being slashed to £12,000. But the overall ISA limit will still remain at £20,000 – personal finance expert Martin Lewis has explained that this means you could save £12,000 into a cash ISA, and then have £8,000 leftover to save in another type of ISA.
He said: “The ISA limit is £20,000 and will remain at £20,000 even for under-65s after 2027, which means you can put £20,000 in a shares ISA, you could also choose to put some in cash.
“Let’s say you put £1,000 in cash, well that reduces the amount you can put in shares by £1,000, because it still has the total of £20,000.
“You can do that all the way up from 2027 to £12,000. So you could have £12,000 in cash, and £8,000 in shares. You don’t have to put the money in shares.
“You could just, from that point, have £12,000 in cash. The key to this rule is, it only impacts new money paid in.”
