The number of cash Isa products on offer has increased by 45 per cent since the launch of the personal savings allowance, according to latest figures.
Data from Moneyfacts, published yesterday (May 20), showed that the number of cash Isas available has risen from 301 to 437 since the introduction of the personal savings allowance on April 6, 2016.
First announced by then Chancellor George Osborne in 2015 the personal savings allowance lets basic rate taxpayers receive up to £1,000 a year in savings income tax-free, dropping to £500 for higher rate taxpayers.
In an Isa the total amount people can save tax free in the current tax year is £20,000.
Moneyfacts suggested people may be investing in cash Isas now to protect savings pots for future tax years when the personal savings allowance may no longer be in force, which could explain why activity in cash Isas has increased.
Darren Cook, finance expert at Moneyfacts, said: "The recent increase in product availability, choice and the demand for cash Isa products may demonstrate that the present interest environment may not be the primary consideration for Isa savers, but motivation lies in the knowledge that this year’s Isa allowance will benefit from future tax relief, when interest may be much higher and the personal savings allowance may be no more.
"With the current economic outlook remaining unpredictable, savers continue to seek future security for their savings."
Moneyfacts pointed out despite the rise in the number of Isas available few of them pay a higher rate of interest than other cash products.
The company also questioned the need for a cash Isa for many savers.
Mr Cook said: "Since the introduction of the personal savings allowance in April 2016, the simple question for savers has been finding a savings account that both best suits their individual needs and that pays the highest interest possible.
"With current interest rates at a historical low, it is likely that the personal savings allowance of £1,000 (or £500 for higher-rate taxpayers) will be more than adequate for most savers to earn interest tax-free, and therefore investing in a cash Isa may be a secondary consideration."
Anna Bowes, co-founder of Savings Champion, said the personal savings allowance had caused cash Isa rates to fall as they became less popular with savers and providers as fewer savers had to pay any tax on their interest.
She added: "However, savings rates as a whole have increased over the last couple of years – due in part to two base rate rises - and this has led to a comeback by the humble Isa, since the personal savings allowance is being used more quickly as rates increase – perhaps leading to an increase in the number of Isas on sale."
Moneyfacts data also showed that the proportion of consumers who searched for fixed cash Isas reached 23 per cent in March, 5.3 per cent higher than in February (17 per cent), while the percentage of users searching for variable rate Isas also increased on a monthly basis, up 4 per cent to 16 per cent in March 2019.