Hargreaves Lansdown has outlined the seven of the most important trends for investors and savers using ISA to consider in 2025, ranging from the most popular stocks and shares ISA investments to the popularity of cash ISAs.
“ISAs never stand still. Various governments have tweaked the rules over the past 26 years – so they’ve evolved from a limited range to something altogether more substantial and flexible. At the same time, we’ve changed too, and how we use ISAs has developed. This year, in particular, there have been some interesting trends,” said Sarah Coles, head of personal finance, Hargreaves Lansdown.
Hargreaves Lansdown, in their own words, present their seven trends for ISAs in 2025:
7 ISA trends
- Cash ISAs have had a huge year
We saw a cash ISA season bonanza, with a long tail that stretched all year. Savers smashed records in April, paying £11.7 billion into cash ISAs – beating every other month for the past 25 years. They then remained committed, and cash ISAs drew in billions of pounds long after the traditional season was over. By the end of November (the most recent data), savers had put £36.3 billion in cash ISAs since the beginning of April.
Why
Income tax thresholds remain frozen, which is pushing more people into higher tax brackets. The OBR estimates that in the current tax year there will be 2.5 million extra higher and additional-rate taxpayers than there would have been if tax thresholds had risen with inflation.
At the same time, although savings rates have fallen from the peak, there are a number of accounts offering just shy of 5%. It means many more people worrying about tax on savings, which has pushed cash ISAs up the agenda for millions of savers. Concerns about potential tax changes in the Budget played their part too, with more savers realising the benefits of being able to protect their savings from the whims of successive chancellors.
These figures support what we’ve been seeing across our Active Savings clients. Within Active Savings, in April we saw a 50% jump in new cash ISA clients. This owes something to the fact we launched our new cash ISA, which allows savers to hold money with more than one bank and in more than one account, within the same ISA wrapper. Between the start and end of 2024, assets in the HL Cash ISA rose 230%, and a cash ISA became the first choice of more than half of HL’s new savers.
| 2024 | Cash ISA savings (Bank of England data) |
| April | £11.7 billion |
| May | £4.2 billion |
| June | £3.4 billion |
| July | £3.8 billion |
| August | £4.2 billion |
| September | £3.9 billion |
| October | £3.1 billion |
| November | £2 billion |
| Total so far | £36.3 billion |
- LISAs have had a record-breaking year so far
This is the biggest ever tax year for the Lifetime ISA, with more people paying into an HL Lifetime ISA during the tax year so far (to the end of December) than any other year on record. It’s up 24% in a year.
The most recent HMRC figures show a record of 755,000 LISAs were paid into during the tax year 2022/23. £1.87 billion was contributed during 2022/23 – a record sum – which was up 10% in a year.
It offers a leg up onto the housing ladder for tens of thousands of young people every year. Buying a home of your own is hard enough – and the government bonus from a Lifetime ISA is the only help some people will get in building a deposit. It could be even more effective if the cap on the value of property people could buy through the scheme was linked to house prices – so buyers are protected from being unable to use their LISA because prices have risen in their area.
The Lifetime ISA is also a key tool in saving for retirement for those who aren’t putting enough aside, including self-employed people. Those who work for themselves don’t benefit from an employer contribution on their pension, so for a basic rate taxpayer, the benefits of paying into a Lifetime ISA are the same as a pension, and both grow free of tax. However, all money withdrawn from a LISA in retirement is tax-free, whereas for a pension, after the tax-free cash, you could end up paying income tax.
The LISA can help support the 1.2 million households that have a self-employed earner paying the basic rate of tax. Analysis by the HL Savings & Resilience Barometer also shows that half a million self-employed people are hoarding more cash than they need to – while carrying a significant retirement savings gap. This cash could be diverted into investment with the LISA, to close the gap.
A few small tweaks to the Lifetime ISA could make an enormous difference for self-employed people. The age that people can open and pay into a Lifetime ISA should be increased to 55, and the penalty for withdrawing for any reason other than for a first property or retirement needs to be cut to 20%. Not only does the current penalty punish people for trying to do the right thing, fear of the penalty can also put people off altogether.
- Stocks and shares ISA numbers are climbing
By the end of 2024, the number of HL stocks and shares ISA clients was up 4% in a year. Over the past five years, it has risen by 50%, to a new high. Broader HMRC figures show the number of people paying into stocks and shares ISAs each year across the whole market has also trended upwards over time, although the data is less up-to-date.
In the first half of the current tax year there was a major rush to top up ahead of the Budget, because dire warnings of tax rises meant more people sought sanctuary in tax free ISAs. It was the second busiest first half of the tax year of all time for HL stocks and shares ISAs – after the pandemic peak of 2022. We also saw a flood of people using share exchange (Bed & ISA) to move investments into ISAs.
Some investors’ worries were realised when the Budget announcement came, and the capital gains tax rate on stocks and shares rose. Coming on the back of significant cuts to the capital gains tax and dividend tax allowances in recent years, it was a bitter blow for those with investments outside an ISA.
By investing through a stocks and shares ISA, you can avoid CGT completely, both when you sell up and cash out and whenever you rebalance your portfolio. You also protect your investment from dividend tax. Bed and ISA, meanwhile, allows you to realise gains within your annual capital gains tax allowance of £3,000 by selling up and immediately buying back within a stocks and shares ISA. Investors who are sitting on large gains have the comfort of knowing that they’re doing what they can to eat into the gain using their annual allowances, and protecting that portion of their portfolio from CGT and dividend tax in future too.
- The average age to hold an ISA is falling
The average age of HL ISA holders has fallen over the years, from 54 five years ago to 51 today. The bulk of the movement came during the years of the pandemic, but it has held firm ever since.
Separate HMRC figures show that despite the fact that most ISAs are held by people aged 65 and over, when you look specifically at the ISAs people paid into during 2021/22, there were more investors contributing aged 25-34 than any other age group.
It reflects the fact that younger people are now more interested in investment, which has become a more mainstream option among younger generations. Some newer investors will have been led astray by social media influencers and are dabbling in the dangerous waters of crypto currency, but the fact so many of them have moved into ISAs that they’re bringing the average age down is a great sign that significant numbers are taking a sensible long-term approach to investment.
- The gender split of ISA holders isn’t improving
Over the past five years, the proportion of HL ISA investors who are women has fluctuated within a narrow range. It fell during the pandemic, and although it has recovered largely since, only 38% of HL ISA investors are women – compared to 39% in December 2019. It reflects the HMRC figures from 2021/22 that show that despite women holding slightly more ISAs overall than men, they’re far more likely to pick cash ISAs. Some 69% of those paying into ISAs during the year only paid into a cash ISA – compared to 56% among men.
Women’s reluctance to invest owes a great deal to the fact that on average they earn less than men, and the more you earn, the more likely you are to have an investment ISA. Women also tend to have less secure incomes, because they’re more likely to have breaks in their career for caring responsibilities or work part time and face a drop in income. It means some may feel they cannot face the risk involved with investment. There’s no denying that there is risk involved, but the way we tend to assess long-term risk is faulty. We feel losses more keenly, so women can over-estimate the risk that investments will lose money over the long term. They may also underestimate the risk their cash ISA will lose value after inflation.
- Investors are holding more in their ISAs
On average, at the end of 2024, HL ISA investors held £59,600 each in their ISAs. This has fluctuated, as more new ISA investors bring the average down, and growth for current investors pushes it up. However, it has trended upwards during the last couple of years.
- The most popular stocks and shares ISA investments are passives.
Of the most bought funds in ISAs in 2024, passives dominated – making up six of the top ten funds, and all of the top five. US indices in particular attracted investment, with UBS S&P 500 Index bought the most – followed by Legal & General US Index. The next three also have US weightings – including Legal & General International Index Trust, Fidelity Index World and Legal & General Global Technology Index Trust.”