Possible change of mind on reducing ISA Allowances

olivetti

it appears that G Brown has backed down on reducing the ISA allowance in the year after next.

see paragraph 5.36 on page 101 of this PDF:
http://news.bbc.co.uk/nol/shared/bsp/hi/pdfs/02_12_04_pbr04_maindoc1.76.pdf

The sentance in green appears to say this.

Not seen it confirmed elsewhere though!

isasmurf

The Government are to consult on extending the 'introductory' limits to 2009 (hardly introductory anymore!). So I think it'll be safe to assume that they'll be extended.

For anybody that doesn't want to download the large document in the link in the above post, the relevant paragraph in the PBR book reads,

"When ISAs were introduced in 1999 they were guaranteed to run for ten years to 2009, and the overall annual investment limit was set at £5,000, with a maximum of £1,000 in cash. A higher initial limit of £7,000, with a maximum of £3,000 in cash, was set for the first year to encourage new saving. In 2000, this higher limit was extended to April 2006. The Government remains committed to ISAs and plans, subject to consultation, to further extend the existing higher ISA limits to 2009. The Government would welcome views and evidence on this proposal from industry, consumer groups and others. For someone saving the maximum each year this would permit £70,000 in tax-relieved savings over ten years, well above the £50,000 orginally promised."

deemy2004

I thought this may happen several months ago.

Its an easy decision, which is likely to have a lot of support from all sectors so definetly an easy vote winner for the government !

Lets hope its not just an election gimmick !

Reaper

Clever isn't it? Instead of giving anything away he gets credit just for not taking something away.

Politicians, eh?

Milarky

What the Chancellor said:

To help savers it is right to extend the tax free advantages for the first £7,000 of savings - £3,000 for the cash component - in Individual Savings Accounts each year. So I will consult on extending the ISA limit for another five years, to 2009.

http://www.guardian.co.uk/budget2005/story/0,15595,1365034,00.html

Just to clarify. This means that £7000 [£3000 for mini ISAs including cash ISAs] can now be subscribed for tax years 2006/07, 2007/08 and 2008/09 instead of the formerly announced limits of £5000/£1000?

And ISAs are still currently due to end on 5th April 2009?

What do think might succeed ISAs at that stage?

isasmurf

Just to clarify. This means that £7000 [£3000 for mini ISAs including cash ISAs] can now be subscribed for tax years 2006/07, 2007/08 and 2008/09 instead of the formerly announced limits of £5000/£1000?

No, not yet.  He is to consult the industry on whether they think it is a good idea.  Expect it to be formalised in the budget, I mean who is going to say "No Gordon, I think you were right in the first place to reduce the rates to £5,000 and £1,000"

And ISAs are still currently due to end on 5th April 2009?

The guarantee that ISAs will exist ends on 5th April 2009.  That doesn't mean they will end.  They might, they might not.  A review is promised for 2006 as to what will happen to ISAs post 2009.

Milarky

2009 will be an 'election year' too, of course!

deemy2004

What the Chancellor said:

http://www.guardian.co.uk/budget2005/story/0,15595,1365034,00.html

Just to clarify. This means that £7000 [£3000 for mini ISAs including cash ISAs] can now be subscribed for tax years 2006/07, 2007/08 and 2008/09 instead of the formerly announced limits of £5000/£1000?

And ISAs are still currently due to end on 5th April 2009?

What do think might succeed ISAs at that stage?

Well 2009 will mark the brown premiership, so I guess he will model their replacement in his own image  ;D

Tax free accounts have now taken a firm hold for over 10 years now, going back to the TESSA's so there WILL be something to replace them, they may even be extended as is for another 5 years, i.e. every election cycle.

blinko

yes why do i get the feeling this is just an election promise

Walletwatch

I think the chronology of this was that the ISA was first introduced on a test basis in 1999 for ten years, with the limits to be re-evaluated one year later, and definitely to go down effective April 2006. So the expected and promised life of the ISA, as guaranteed on its inception was always ten years, till 2009.

Hope I've got my History right on that one...

I do agree that promising to 'consult' on the extension is a no-brainer - on the one hand, Brown wants to encourage savings, and on the other hand, he says, 'That does not mean I give you an incentive, I want my taxes' ;D

isasmurf

Almost right walletwatch. The chronology was ISAs were launched from April 1999 with a 10 year guarantee of existence. A review would take place by 2006. The annual allowances were set at £5,000 overall, and £1,000 in cash. To encourage take-up the limits were set at what we are now all used to of £7,000 overall and £3,000 cash, for the first year only. In the 2000 Budget, it was announced that those limits would continue for the second year. In November 2000 the Chancellor then announced that the higher limits would continue until 2006.