Coventry Building Society has issued an update about the state of ISAs in Britain as more savers find themselves falling foul of Chancellor Rachel Reeves’s stealth tax raid.Based on the latest Bank of England figures, savings account holders added £3.6billion into cash ISAs in June 2025.Overall, this mean that the total amount saved in tax-free accounts has reached a record £33.8billionn in the first half of 2025. This comes after April saw a £14billion jump in cash ISA deposits, with May posting a surge of £3.9billion.Analysts note that this means with cash ISA deposits have consistently exceeded £3billion every month since June 2023 as savers have become more concerned about their tax liabilites.In recent months, reports suggested that Chancellor Rachel Reeves was considering slashing the £20,000 tax-free allowance attached to ISA products to just £4,000.However, it is understood that the Treasury has halted any reform to ISAs for the time being as it explores other tax-generating revenue options.Analysts note that savers are still being slapped with a stealth tax raid due to the impact of fiscal drag, which has been in effect from the previous Chancellor Jeremy Hunt.Fiscal drag occurs when taxpayers are dragged into paying more money to HM Revenue and Customs (HMRC) due to frozen allowances.Do you have a money story you’d like to share? Get in touch by emailing [email protected] wages or inflation rise, Britons are pulled across allowance thresholds which results in them losing more of their hard-earned cash to tax.Jeremy Cox, the head of Strategy at Coventry Building Society, noted that this has impacted ISA account holders in recent years.He explained: “Savers have responded to rumours of cuts to cash ISA allowances by pouring billions into tax-free accounts. Cash ISAs have moved beyond their traditional springtime surge — they’re now a regular savings staple for many households across the UK.”Speculation Rachel Reeves was going to announce sweeping changes helped keep the pressure on in June, as many savers rushed to make the most of their allowance. “While changes are seemingly off the agenda with the Chancellor pausing ISA reforms for now, savers remain focused on protecting their savings from income tax and making the most of this year’s £20,000 ISA allowance.“ISAs are also becoming increasingly important for the growing number of savers being pulled into higher tax brackets due to frozen thresholds.”LATEST DEVELOPMENTS:Pension crisis looms as Britons ‘ill equipped to retire’ due to ‘chronically’ low savingsBest savings accounts this week as two banks offer over seven per cent interest on regular savingsSantander offering free £180 cash boost but Britons have only days left to claim”HMRC’s latest figures show that an additional 2.8 million people will be paying the higher 40 per cent tax rate in 2025/26 — 300,000 more than the previous year. “For them, the Personal Savings Allowance will be halved from £1,000 to £500, making it even harder to shield interest from the taxman.”ISAs still remain the best way to protect savings – but any future cut to the cash allowance could leave millions more exposed to tax.”Rachel Reeves is expected to outline any tax changes in her upcoming Autumn Budget, which is expected to take place in October 2025.
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