Discussion
It's a common misconception that all ISAs are fully tax free. Not the case. In the mid 1990s when Gordon Brown was the chancellor he changed the way that tax relief was calculated and applied to dividends, thus raising with almost no publicity some £5B. pa. This change applied to all dividends including those arising in respect of ISAs.
The message is that all politicians love ways they can raise tax without the public fully recognising the true effect on their incomes etc.
R.
The message is that all politicians love ways they can raise tax without the public fully recognising the true effect on their incomes etc.
R.
ISA’s introduced in what 1999 ? as a way to save money / put money away for the future to also potentially assist personal older age pension funding.
Some saved some haven’t ( and not necessarily because of no ability to ) so would seem unfair to then penalise those that have been “ sensible “.
Apparently this would save £1b a year.
I could see a cap ( lifetime ) being introduced but imagine it would need to be higher than this £100k and /or more likely allow a grandfather clause to apply once a start date had been introduced so that people who have saved are protected from say double taxation.
Some saved some haven’t ( and not necessarily because of no ability to ) so would seem unfair to then penalise those that have been “ sensible “.
Apparently this would save £1b a year.
I could see a cap ( lifetime ) being introduced but imagine it would need to be higher than this £100k and /or more likely allow a grandfather clause to apply once a start date had been introduced so that people who have saved are protected from say double taxation.
alscar said:
ISA’s introduced in what 1999 ? as a way to save money / put money away for the future to also potentially assist personal older age pension funding.
Some saved some haven’t ( and not necessarily because of no ability to ) so would seem unfair to then penalise those that have been “ sensible “.
Apparently this would save £1b a year.
I could see a cap ( lifetime ) being introduced but imagine it would need to be higher than this £100k and /or more likely allow a grandfather clause to apply once a start date had been introduced so that people who have saved are protected from say double taxation.
I doubt it will happen, but if it did a grandfather clause has no place being implemented. Any rule should be equally applied. Any tax would only apply to interest so it hardly penalises people who have been sensible. The country is facing enough cost with triple lock pensions and the rising cost of healthcare without yet another benefit that only the older generation are likely to receive. Some saved some haven’t ( and not necessarily because of no ability to ) so would seem unfair to then penalise those that have been “ sensible “.
Apparently this would save £1b a year.
I could see a cap ( lifetime ) being introduced but imagine it would need to be higher than this £100k and /or more likely allow a grandfather clause to apply once a start date had been introduced so that people who have saved are protected from say double taxation.
Dingu said:
I doubt it will happen, but if it did a grandfather clause has no place being implemented. Any rule should be equally applied. Any tax would only apply to interest so it hardly penalises people who have been sensible. The country is facing enough cost with triple lock pensions and the rising cost of healthcare without yet another benefit that only the older generation are likely to receive.
Yup in retrospect I agree with you about the tax only being applied on interest ( wasn’t thinking straight ) but the saving in the first place still means those that have been sensible are directly affected albeit penalised might be a strong word. Also there are plenty of non older generation that have been saving £20k per year for the last 5 years presumably ?
Can't see how they could do it on a S&S ISA that one year can be up +20%, and the following year down -20%. Tax has already been paid on money going in so it's nothing like a SIPP
I can however quite easily see a reduction in the yearly amount you can add to an ISA, or some kind of tax on a cash ISA over a certain amount - for example 100k
I can however quite easily see a reduction in the yearly amount you can add to an ISA, or some kind of tax on a cash ISA over a certain amount - for example 100k
I read something about a recent increase in the percentage of people, who only possess savings equal to less than one months salary.
The period of very low interest rates was understandably a disincentive to save, and if the attractiveness of ISAs were to be reduced, that would push this trend further.
Governments usually want to encourage saving, because otherwise problems can end up on 'their plate'.
With the 5 year term system though, politicians tend to have short time horizons.
"Well, that will be my successors problem".
Hardly a helpful viewpoint.
Perhaps also the same reason, why the UK now finds itself reliant on other countries, for sufficient electricity generation.
alscar said:
ISA’s introduced in what 1999 ? as a way to save money / put money away for the future to also potentially assist personal older age pension funding.
Some saved some haven’t ( and not necessarily because of no ability to ) so would seem unfair to then penalise those that have been “ sensible “.
Apparently this would save £1b a year.
I could see a cap ( lifetime ) being introduced but imagine it would need to be higher than this £100k and /or more likely allow a grandfather clause to apply once a start date had been introduced so that people who have saved are protected from say double taxation.
Some saved some haven’t ( and not necessarily because of no ability to ) so would seem unfair to then penalise those that have been “ sensible “.
Apparently this would save £1b a year.
I could see a cap ( lifetime ) being introduced but imagine it would need to be higher than this £100k and /or more likely allow a grandfather clause to apply once a start date had been introduced so that people who have saved are protected from say double taxation.
The savings scheme was introduce in the 1986 Budget.
Chancellor was Nigel Lawson, Prime Minister was Margaret Thatcher.
A different name was originally used, Personal Equuty Plan.
Governments love to use the phrase, 'save £1bn a year'. Often when they say this, the money is not being saved at all, it is just the amount they think a new tax grab might accrue, and is usually a vastly inflated figure.
The only money that would be paid to the government, if S&S ISAs were scrapped, would be Capital Gains Tax.
If you don't sell, you don't pay any CGT anyway, so hardly money the government can obtain.
Would life be more pleasant, if politicians stopped lying about so many things?
Have politicians always lied, or is there more of it now than ever before?
Link to the source report produced by the Resolution Foundation:
https://www.resolutionfoundation.org/press-release...
Of course the rich pocket the lion’s share of ‘the cost’ of ISA tax relief. However, this stored wealth will presumably re-circulate through the economy at some point not least upon death as ISAs are included within ones taxable estate and clearly a proportion of those with £100k+ in their ISAs will be exposed to an IHT haircut on death.
Will be interesting to see what reforms are coming our way in March.
https://www.resolutionfoundation.org/press-release...
Of course the rich pocket the lion’s share of ‘the cost’ of ISA tax relief. However, this stored wealth will presumably re-circulate through the economy at some point not least upon death as ISAs are included within ones taxable estate and clearly a proportion of those with £100k+ in their ISAs will be exposed to an IHT haircut on death.
Will be interesting to see what reforms are coming our way in March.
Phooey said:
Can't see how they could do it on a S&S ISA that one year can be up +20%, and the following year down -20%. Tax has already been paid on money going in so it's nothing like a SIPP
I can however quite easily see a reduction in the yearly amount you can add to an ISA, or some kind of tax on a cash ISA over a certain amount - for example 100k
More complexity… and changing the rules half way along.I can however quite easily see a reduction in the yearly amount you can add to an ISA, or some kind of tax on a cash ISA over a certain amount - for example 100k
This is why I think pensions are dangerous.
If the rules could change on ISA, dumping cash into a pension today to be ‘prudent’ could just leave you exposed as a “rich person with too much money” to be taxed more later.
The ISA levels have been very moderate so it’s not like people have millions and billions wrapped up.
But what they do have wrapped up we’re likely hard earned and expected to be safe as promised.
What a dangerous precedent to set if changes were made.
Also talk of taxing primary residences for CGT etc.
A great way to demotivate your population and lose any remaining trust.
This entire thing has to work the other way around.
Lead by example.
Until this country works, no waste or corruption, and the leadership are squeaky clean, asking everyone to pay more to keep the status quo, isn’t going to work.
Mr Whippy said:
More complexity… and changing the rules half way along.
This is why I think pensions are dangerous.
If the rules could change on ISA, dumping cash into a pension today to be ‘prudent’ could just leave you exposed as a “rich person with too much money” to be taxed more later.
The ISA levels have been very moderate so it’s not like people have millions and billions wrapped up.
But what they do have wrapped up we’re likely hard earned and expected to be safe as promised.
What a dangerous precedent to set if changes were made.
Also talk of taxing primary residences for CGT etc.
A great way to demotivate your population and lose any remaining trust.
This entire thing has to work the other way around.
Lead by example.
Until this country works, no waste or corruption, and the leadership are squeaky clean, asking everyone to pay more to keep the status quo, isn’t going to work.
Agree entirely. This is why I think pensions are dangerous.
If the rules could change on ISA, dumping cash into a pension today to be ‘prudent’ could just leave you exposed as a “rich person with too much money” to be taxed more later.
The ISA levels have been very moderate so it’s not like people have millions and billions wrapped up.
But what they do have wrapped up we’re likely hard earned and expected to be safe as promised.
What a dangerous precedent to set if changes were made.
Also talk of taxing primary residences for CGT etc.
A great way to demotivate your population and lose any remaining trust.
This entire thing has to work the other way around.
Lead by example.
Until this country works, no waste or corruption, and the leadership are squeaky clean, asking everyone to pay more to keep the status quo, isn’t going to work.
Not seen any talk of taxing primary residences though - don’t give them ideas !
There are a few ISA millionaires but only a small handful and a lot of them converted them over from PEPs.
They are not going to be able to put a £100k cap retrospectively (or otherwise) on Stocks and Shares ISAs where individual assets within - which could be equities, bonds, REITs or anything - are jumping around all over the place. It would be virtually impossible to keep track of capital gains and taxable income on the variable excess in a way that could be reportable to HMRC.
As Phooey says, I do think a reduction in the annual subscription limit is much more feasible, say to £10k pa. Or introduce an LTA of subscriptions (contributions) going forward. That is way more doable in software and tax recording terms. Actually I should shut up in case that gives them an idea.
They are not going to be able to put a £100k cap retrospectively (or otherwise) on Stocks and Shares ISAs where individual assets within - which could be equities, bonds, REITs or anything - are jumping around all over the place. It would be virtually impossible to keep track of capital gains and taxable income on the variable excess in a way that could be reportable to HMRC.
As Phooey says, I do think a reduction in the annual subscription limit is much more feasible, say to £10k pa. Or introduce an LTA of subscriptions (contributions) going forward. That is way more doable in software and tax recording terms. Actually I should shut up in case that gives them an idea.
Edited by WayOutWest on Sunday 22 January 19:16
S&S ISAs are almost too good to be true. This is coming from someone who maxes out his allowance each year.
I’d be interested in hearing if any other countries have such a generous system, which almost entirely is set up for high earners.
If I was a poor person, and I learnt that a well-off couple can put aside £40k a year, and never be taxed on the capital gains or income for their entire life, I would be livid. It’s a scheme that only benefits those who are in the top few %.
I’d be interested in hearing if any other countries have such a generous system, which almost entirely is set up for high earners.
If I was a poor person, and I learnt that a well-off couple can put aside £40k a year, and never be taxed on the capital gains or income for their entire life, I would be livid. It’s a scheme that only benefits those who are in the top few %.
Mogul said:
Of course the rich pocket the lion’s share of ‘the cost’ of ISA tax relief. However, this stored wealth will presumably re-circulate through the economy at some point not least upon death as ISAs are included within ones taxable estate and clearly a proportion of those with £100k+ in their ISAs will be exposed to an IHT haircut on death.
£7 billion cost of ISAs is sensationalised nonsence.
Cash ISAs - The interest rates paid are frequently less than normal savings accounts. - Minimal incentive to even use them.
Stocks and Shares ISAs - The only significant benefit of an ISA now, is the CGT exemption.
It has been shown in the past, that increasing the severity of CGT, results in the Treasury receiving less tax, not more, as claimed at the time of a rate increase. Following a CGT rate reduction, it was found two years later, that the Treasury was receiving more revenue from the tax. Triggering CGT is very often voluntary. If you don't consider the tax is fair, then simple, you don't sell the asset and so no tax becomes payable. Nothing goes to the Treasury. As you know, on death, CGT does not apply, it is replaced by IHT.
Turn the whole thing around. No ISAs, then incentive to save is removed and msny people would not even bother. There would then be less wealth to 're-circulate through the economy at some point not least upon death, as ISAs are included within ones taxable estate'.
EDIT. It should also be remembered, that the (already taxed) money that people (most not wealthy to begin with) put into to S&S ISAs, is financing businesses (many of which are British) enabling employment and growth, resulting in higher profits and so more tax being paid to the Treasury. Obviously cannot pay for hospitals railways, schools etc., without successful private enterprises.
Edited by Jon39 on Sunday 22 January 19:47
Jon39 said:
£7 billion cost of ISAs is sensationalised nonsence.
Cash ISAs - The interest rates paid are frequently less than normal savings accounts. - Minimal incentive to even use them.
Stocks and Shares ISAs - The only significant benefit of an ISA now, is the CGT exemption.
It has been shown in the past, that increasing the severity of CGT, results in the Treasury receiving less tax, not more, as claimed at the time of a rate increase. Following a CGT rate reduction, it was found two years later, that the Treasury was receiving more revenue from the tax. Triggering CGT is very often voluntary. If you don't consider the tax is fair, then simple, you don't sell the asset and so no tax becomes payable. Nothing goes to the Treasury. As you know, on death, CGT does not apply, it is replaced by IHT.
Turn the whole thing around. No ISAs, then incentive to save is removed and msny people would not even bother. There would then be less wealth to 're-circulate through the economy at some point not least upon death, as ISAs are included within ones taxable estate'.
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