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In May savers put £4.2bn into their cash Isas, a record for the month, which is thought to be down to frozen income thresholds.
The Bank of England's monthly money and credit stats also showed net mortgage approvals in the month were down by 800 to 60,000 compared to the previous month.
The net flow of money amounted to £2.6bn in May, which the bank said was largely driven by households’ holdings of money, which saw an increase of £5.3bn.
The £4.2bn put into Isas by households built on the record £12.3bn put away in April.
Laith Khalaf, head of investment analysis at AJ Bell, said more people are being pushed into high rate income tax bands where personal savings allowances fall from £1,000 to £500.
He said: "The new tax year has started with a big bang for cash Isa savers, as £4.2bn was tucked away in these tax shelters in May.
“Early bird Isa savers are no doubt out in force because they know taxes are rising as a result of frozen income tax thresholds.
“At the same time tax thresholds have been frozen, interest rates have risen, making it more likely that savers will breach their tax-free savings allowance.
"The best easy access rates are offering around 5 per cent interest, which would mean a basic rate taxpayer with over £20,000 in cash, or a higher rate taxpayer with over £10,000 in cash, would be on the brink of paying tax on their cash interest, unless held in a tax shelter."
Khalaf said frozen tax thresholds are expected for the next four years of government, resulting in an increase in income tax for most.
He added: "Office for Budget Responsibility estimates show collectively we’re going to be paying around £20 to £25bn a year more as a result of the freeze on the personal allowance and higher rate threshold.
"The budget watchdog also reckons the freeze will bring 3.2mn people into paying tax, while creating 2.1mn more higher rate taxpayers and 350,000 more additional rate taxpayers. We can probably therefore continue to expect Isas to play a starring role in the financial plans of anyone looking to save for their future."
Mortgage approvals in May were 60,000, a similar figure to the past four months, representing a bounce back from the January 2023 low of under 40,000.
tara.o'connor@ft.com
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