Adult cash ISA balances increased by £38bn between the end of January and the end of May as savers rushed to maximise tax-free savings ahead of the planned reduction in the annual cash ISA allowance, new analysis has revealed.

According to analysis of CACI data by Paragon Bank, balances held in fixed-rate and instant access adult cash ISAs rose to £478bn across 25.6 million accounts for the period, which the bank described as a "tax-free wrapper during a busy ISA season".

The average adult cash ISA balance increased from £17,264 to £17,848 over the period, while the average balance held in non-ISA savings accounts fell slightly from £11,513 to £11,416, indicating savers favoured tax-free accounts during the peak ISA season.

Fixed-rate products drove most of the growth, with balances rising by £28.8bn to £269.9bn as customers locked in returns amid expectations of lower interest rates and forthcoming changes to ISA rules. Instant access cash ISA balances also increased, climbing by £9.6bn to £203.5bn.

The figures come as the annual cash ISA allowance will drop from £20,000 to £12,000 for under-65s from April 2027.

Andrew Wright, head of savings at Paragon Bank, said: “The £38bn increase in adult cash ISA balances shows that savers continue to recognise the value of protecting their interest from tax. It appears many used the busy ISA season to make more effective use of the tax-free wrapper. The particularly strong growth in fixed-term ISAs also suggests that customers were keen to secure competitive rates amid expectations that interest rates could fall.”

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