Savers grew the overall amount held in adult cash ISAs by £45bn last year as more people opted for the tax-free wrapper, research by Paragon Bank has shown.

Paragon’s analysis of CACI data showed that adult cash ISA savings balances grew 14% between January and the end of the December 2024, to a total balance of £359bn.

The figures revealed that non-ISA cash savings balances also grew during the year, by 2.4%, or £19bn, to a total £808bn.

Paragon suggested that cash savers targeted the security of ISAs as more savers became liable for income tax on their savings interest. There are an estimated 6.1 million savings accounts generating interest over £1,000 a year according to industry figures, breaching the personal savings allowance for basic rate taxpayers.

According to Treasury figures, savers will pay £10.3bn in income tax on savings income in the 2024/25 tax year, a figure up 665% on the £1.4bn recorded in 2021/22.

Paragon’s managing director of savings, Derek Sprawling, said: “As savings rates have risen, more and more people are generating enough interest on their savings to incur income tax. That has driven a shift towards ISAs and is a trend we expect to continue throughout 2025.

“Cash ISAs are a popular vehicle for savers of all kinds, particularly those who want certainty and security in later life and those saving for a big-ticket item and wish to do so without paying tax on the interest they earn.

“Despite this, adult cash ISA savings represent less than a third of overall cash savings balances, suggesting more savers could be taking advantage of this tax-free wrapper.”

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