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A financial expert says that Brits pumping money into Cash ISAs is an ‘unintended consequence’ of Chancellor Rachel Reeves’ tax changes.

In last year’s budget, the Chancellor of the Exchequer announced that those under 65 would only be allowed to put £12,000 a year into Cash ISAs. It has also been confirmed that interest paid on uninvested funds in Stocks and Shares ISAs will be taxed at 22 per cent, with both changes set to be introduced in the 2027/28 tax year.

Ms Reeves’ aim is to encourage more people to invest their money in things like stocks and shares, which historically make better returns than cash. Holding money in cash or in a Cash ISA often means it makes little more than the current rate of inflation, eating into your spending power.

Stats show that people are rushing to open new Cash ISAs and pump as much money as possible into them, possibly as they know that the tax rules are changing next year. Some £12 billion was ploughed into Cash ISAs in April 2026 – one of the highest monthly amounts on record.

Sarah Coles, head of personal finance at AJ Bell, said that ‘this is hardly the result the government would have been hoping for’ given Ms Reeves’ hopes for more investing.

Ms Coles said: “The dash for Cash ISAs in May, on the back of a £12 billion boost in April, lays bare the unintended consequences of cutting the Cash ISA allowance.

“This tax year is the last chance for under 65s to pay in up to £20,000 before their allowance is cut to £12,000 from April 6 2027. It means they’re filling their boots while they can. For a policy that was intended to encourage people to move away from cash and towards investing, this is hardly the result the government would have been hoping for.

“Cash plays a vital role in everyone’s lives, and anyone of working age typically needs enough to cover three to six months’ worth of essential spending in an easy access account – plus money for any planned one-off expenses in the next five years.

“However, beyond that, it’s worth considering if a Stocks and Shares ISA could be a better home for a portion of your portfolio. In the short term you may see the ups and downs of the stock market, but in the long run, it has a far better chance of beating inflation, so you can build a valuable nest egg.

“There was some account juggling during the month, with money coming out of easy access accounts. However, interestingly, savers were also moving into fixed rate accounts. Inflation expectations at the time, plus competition in this market, has nudged rates higher, while easy access rates stagnated. Savers are realising the benefits of fixing savings that they won’t need for a period in return for more interest.

“Savers tend to keep too much of their savings in easy access accounts, because it makes them feel comfortable to have it close at hand. However, this is a valuable reminder of the benefits of considering how much of your savings you’ll actually need to spend during the next year, and what you can tie up for longer, in order to make the most of your savings.

“Mortgage approvals dropped in May, as some of the enthusiasm from buyers in the early spring slowly seeped out of the market. At this stage, there was no end in sight for the Iran war, and inflation expectations had pushed mortgage rates higher through March and April. We will have to wait and see whether the peace agreement and more optimism emerging in June persuades buyers back to the market, or whether the recent turmoil has persuaded them that now isn’t the time to take a leap of faith in the property market.”