Savers are flocking to cash ISA products ahead of rumoured tax raid coming from Chancellor Rachel Reeves with Coventry Building Society telling customers “now it the time to act”.

It is understood the Treasury is exploring cutting the tax-free allowance linked to the savings accounts from its current threshold of £20,000 to £10,000, which would make more Britons liable for paying tax.

September’s Bank of England data reveals that British savers deposited £2.4billion into cash ISAs, bringing this tax year’s total to £28.4billion. The figures show a marginal decrease compared to the previous tax year’s equivalent period, which recorded £28.6bn. N

Since assuming her role in July 2024, deposits under Ms Reeves’s chancellorship have exceeded £62billion, enabling savers to potentially sidestep income tax obligations worth more than £309million.

Jeremy Cox, the head of Strategy at Coventry Building Society, urged savers to maximise current allowances while the tax-free thresholds remain available in their current form.

“Cash ISAs continue to be a go-to for savers and for good reason. You can save up to £20,000 a year and keep every penny of interest tax-free. It’s simple, effective, and increasingly valuable,” he stated.

Mr Cox highlighted that approximately seven million individuals are projected to become higher-rate taxpayers this year, subject to 40 per cent income tax.

He warned that additional people might witness their returns diminished by taxation, particularly if ISA thresholds face reduction.

“Now’s the time to act. If you haven’t used your full ISA allowance but have cash savings elsewhere, don’t wait. Make the most of it while you still can,” Mr Cox advised.

Fresh research from Nottingham Building Society paints a concerning picture of Britain’s savings habits, revealing that 44 per cent of adults do not put money aside consistently.

The problem affects women disproportionately, with 47 per cent admitting irregular saving patterns compared to 40 per cent of men, a survey commissioned by the building society found.

Those aged 60 and above in Britain face particular challenges, with 48 per cent unable to maintain regular savings and 34 per cent only managing to save sporadically.

The study, encompassing over 2,000 participants, suggests that 57 per cent are not saving more than the previous year, a figure that jumps to 70 per cent among older demographics.

Analysts have cited the impact of fiscal drag. The ongoing income tax threshold freeze continues to function as a stealth tax, drawing millions into elevated tax brackets whilst living expenses climb and wages remain static.

Nottingham Building Society’s research exposed stark regional variations in savings behaviour, with the North East experiencing the most acute difficulties as 52 per cent of residents cannot maintain consistent savings habits.

Wales follows closely with half its population facing similar challenges, while 47 per cent of those in the South East struggle to save regularly. When examining preferred savings vehicles, 37 per cent of respondents identified Cash ISAs as their most trusted option, which increases to 47 per cent among those over 60.

HMRC statistics reinforce this trend, showing cash ISA subscriptions soared nearly 70 per cent in 2023-24 to almost £70billion, representing two-thirds of all new ISA accounts opened.

By contrast, merely 18 per cent of savers feel comfortable placing funds in stocks and shares ISAs. This reluctance towards investment risk appears particularly pronounced amongst women, where only 13 per cent favour equity-based ISAs compared to 24 per cent of men.

Harriet Guevara, Chief Savings Officer at Nottingham Building Society, cautioned against reducing the cash ISA allowance as a means to encourage investment culture.

“Cash ISAs remain one of the few straightforward, low-risk tools that help people build financial security, particularly during periods of economic uncertainty,” she stated.