Savers are being urged to "lock in" competitive savings rates attached to ISAs before Chancellor Rachel Reeves reforms come into effect next year.
The Chancellor is preparing to cut the tax-free cash ISA allowance from £20,000 to £12,000 in April 2027 in a bid to encourage Britons to use stocks and shares products.
It is understood Ms Reeves is preparing to introduce a 22 per cent levy on the savings interest accrued from ISAs, as well as create an alternative to Lifetime ISAs.
Analysis from Investec determines that cash ISA interest rates are climbing sharply as a torrent of deposits flood the market ahead of next year's reforms.
Savers are being urged to 'lock in'' before the Chancellor's tax raid on ISAs
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The platform's research has found that the average rate for the top 30 one-year fixed cash ISAs jumped to 4.49 per cent AER, up from 4.36 per cent AER in April and just 4.03 per cent AER in February.
This rapid three-month surge has added 0.46 per cent to top-tier market returns, intensifying competition among banks and building societies.
Forecasts suggest that total net inflows into cash ISAs could grow by as much as 20 per ecnt this tax year, potentially pushing annual cash-specific ISA deposits to a record of £85billion.
David Hunt, the head of Savings at Investec Bank, broke down the state of the market and why
The ISA allowance resets each year on April 6, when a new tax year begins | GETTYLATEST DEVELOPMENTS
Industry figures have warned the proposed ISA changes could remove one of the few straightforward options available | GETTYHe explained: "We are witnessing an extraordinary flight to fixed-rate cash ISAs as savers look to lock in peak guaranteed returns.
"This historic wave of deposits is driven by dual motivation. Savers want to stay ahead of inflation while taking full advantage of the current tax rules.
"Our decision to boost our One-Year Fixed ISA to a competitive 4.56 per cent AER ensures that clients can maximise their tax-free growth at a time when guaranteed yield has rarely been more valuable."
As it stands, the overall tax-free allowance across all available ISA products remains at £20,000, which includes cash, stocks and shares, and lifetime accounts.
Rachel Reeves announced in the November 2025 Autumn Budget that the annual tax-free cash ISA allowance will be reduced from £20,000 to £12,000 | PAHowever, analysts warn this will likely be the final financial year someone can place up to £20,000 in cash ISAs.
Rachel Springall, a finance expert at Moneyfactscompare, said: "Outside of cash ISAs, the fears surrounding a hike in the cost of living this year could start to take its toll on consumers, as it could hit their disposable income.
"Flexible savings pots or current accounts are useful to quickly use funds to cover any unexpected costs, or are a temporary holding. In April 2026, mass withdrawals were made of £13.1billion from interest-bearing sight deposits, such as easy access accounts and current accounts.
"A similar pattern occurred in April 2025 with withdrawals of £11.1billion. Those with an old pot just need to make sure they are earning an inflation-busting rate and review it every few months if they have got their cash stored temporarily."