In 2025, adult cash ISA balances saw a remarkable surge as savers raced to protect their tax-free returns prior to the highly anticipated Autumn Budget. New analysis from Paragon Bank, examining CACI data from January to December 2025, reveals that cash ISA balances increased by over £50 billion while non-ISA balances declined, highlighting a clear shift in savings behaviour.
The study found the average adult cash ISA balance grew from £15,919 to £17,225 over the year, contrasting with a slight decrease in the average non-ISA balance from £11,919 to £11,909. This trend suggests savers actively reallocated funds into tax-efficient savings vehicles ahead of the announced reduction in the cash ISA allowance.
Total cash ISA holdings climbed by £57 billion, reaching £436 billion across 25 million accounts by the end of 2025. This growth was significantly driven by a surge in fixed-term ISA products, which rose to £237.7 billion—an increase of £35.8 billion—as savers sought to lock in attractive rates before expected cuts in interest rates and tax advantages. Instant access ISA balances also expanded steadily by £22.4 billion, totaling £192.9 billion.
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Conversely, non-ISA savings saw a reduction of £1.8 billion, falling to £845.6 billion across 71 million accounts. This decline was primarily due to withdrawals from fixed-term non-ISA accounts as funds were redirected into more tax-efficient ISAs.
Andrew Wright, head of savings at Paragon Bank, commented: “2025 was a pivotal year marking a clear shift in saver behaviour. Many people took proactive steps to safeguard their returns by increasing their use of tax-efficient savings options.
“The anticipation of upcoming changes in the Autumn Budget prompted savers to reassess where their money was held and to maximize benefits from cash ISAs while allowances remained unchanged.
“Fixed-term ISAs were especially popular as savers sought both tax planning advantages and rate certainty amidst expectations of falling interest rates. This combination made these products highly attractive.”
Starting April 2027, changes introduced by Chancellor Rachel Reeves will limit contributions to cash ISAs to £12,000 annually for those under 65, down from previous levels. While the overall ISA allowance will remain at £20,000, the £8,000 difference must be invested in other types of ISAs, reshaping the landscape of tax-efficient savings.