A financial expert has claimed that Brits pouring cash into Cash ISAs is an 'unintended consequence' of Chancellor Rachel Reeves' tax reforms.

In last year's budget, the Chancellor of the Exchequer revealed that those under 65 would only be permitted to deposit 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 due to be introduced in the 2027/28 tax year.

Ms Reeves' goal is to nudge more people towards investing their money in assets such as stocks and shares, which historically deliver stronger returns than cash. Keeping money in cash or in a Cash ISA frequently means it barely keeps pace with the current rate of inflation, steadily eroding your spending power.

Figures reveal that people are scrambling to open new Cash ISAs and deposit as much money as possible into them, likely because they are aware that the tax rules are shifting next year. A staggering 12 billion was funnelled into Cash ISAs in April 2026 - one of the highest monthly totals on record.

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Sarah Coles, head of personal finance at AJ Bell, noted that 'this is hardly the result the government would have been hoping for' given Ms Reeves' ambitions for greater investment.

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.

Cash ISA application form [Cash ISA application form]
Cash ISAs were first created in 1999

"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."

In the Budget last autumn, Rachel Reeves said: From April 2027, I will reform our Isa system, keeping the full 20,000 allowance while designating 8,000 of it exclusively for investment, with over-65s retaining the full cash allowance. And thanks to our changes to financial advice and guidance, banks will be able to guide savers to better choices for their hard-earned money. Over 50% of the Isa market including Hargreaves Lansdown, HSBC, Lloyds, Vanguard and Barclays have signed up to launch new online hubs to help people invest here in Britain.