2009/2010 ISA Limits

humfer

All sorts of rumours that GB is going to raise the £3,600 cash threshold again this year. What do people reckon it may go up to?

Also, do people see much activity around the April end/start dates which would hopefully mean higher rates being offered? I have a fixed ISA with Lloyds at 6.something % so am expecting to struggle to get anything better than half that (although saving loads on my tracker mortgage so cannot grumble too much)

Baldur

It would be good news for savers if he does, as last year's increase was the only one since ISAs were introduced in 1999.

The current fiscal policy appears to be aimed more at promoting spending, rather than saving.

LongTermLurker

Yes, and with all the spending, I doubt they'll be in too big a hurry to give away the income tax that would be lost. Personally, I won't be diving into ISAs unless rates start to look reasonable. I have enough high interest non-ISA accounts available that can beat the current ISA rates and that being the case, I can stay out of ISAs until the end of the 1009/10 tax year if need be - or at least November.

dunstonh

All sorts of rumours that GB is going to raise the £3,600 cash threshold again this year. What do people reckon it may go up to?

Financially, he would be daft to do this.

However, seeing as the Conservatives have mentioned they would reduce tax on savings and it would be seen as a votes winner, its quite possible that GB will give in and go with what's popular and not with what is financially best.

Personally, I would guess it will remain as it is

sdooley

Well with base rates being where they are I think tax receipts from savings interest are naturally going to plummet. ISAs will make very little difference.

I think more dramatic measures are needed to encourage small savers - perhaps a refund of income tax on earned income going into medium term savings or savings for a house deposit like they have in Germany.

chopperharris

we easilly forget that the banks needed capital recently , deposits in other words to balance lending and bad debt.Isas are the best way imo to acheive a healthier economy and lessen recession time at the banking part.

It would be a good idea to increase isa limits , to almost double what they are now , in an either cash or shares option.A winner would be if any money removed from it would incur a very small tax.You can see the benefit there , banks get capital ,which unburdens the ability to free credit again to the punter ....and helps libor.Govt gets its money back all the sooner from those shares and loans.

How about increasing the isa to the amount people can already pay for a mortgage per month , then this leaves open a new kind of mortgage paying system?If this removes too much tax for govt plc then why not for half of the mortgage then?Or alternatively legislate mortgages to max 80 percent of current value to lessen the chance of negative equity with the rest by an isa for deposits?

I like my cash isas , i see them as my third pension , no doubt I will never see it but at least my sigoth can benefit from it.

apt

LongTermLurker wrote: »

Yes, and with all the spending, I doubt they'll be in too big a hurry to give away the income tax that would be lost. Personally, I won't be diving into ISAs unless rates start to look reasonable. I have enough high interest non-ISA accounts available that can beat the current ISA rates and that being the case, I can stay out of ISAs until the end of the 1009/10 tax year if need be - or at least November.

You need to consider future years as well as 2009-10. Even if you can only get say 3.5% in an ISA and 6% elsewhere the ISA interest will continue to be tax free in future years. Anyone who is likely to become a 40% tax payer at some time is probably still better off getting the maximum interest available within an ISA in 2009-10 and carrying that forward.

LongTermLurker

apt wrote: »

I can stay out of ISAs until the end of the 1009/10 tax year if need be - or at least November.

You need to consider future years as well as 2009-10. Even if you can only get say 3.5% in an ISA and 6% elsewhere the ISA interest will continue to be tax free in future years. Anyone who is likely to become a 40% tax payer at some time is probably still better off getting the maximum interest available within an ISA in 2009-10 and carrying that forward.

Yes, but as I said, if I can save into 6%, 6.3%, 7.75%, 10% and 12% accounts (less tax) there's no benefit in putting money into a much lower untaxed rate until the end of the next tax year. As I can get at least 6% gross until November, if no decent ISA rates crop up in the meantime it makes most sense to save in a taxed environment until (at latest) 5 April 2010. At that point, you can secure your 2009/10 ISA allowance with a lump sum (if rates are still low at that point then it would make sense to choose a variable rate ISA so you can benefit from any rate hikes or even move it without notice to a better one.

You're right, you do need to think of future years but all you're trying to achieve is to reserve your allowance - there's no instant benefit in saving into an ISA from the word go unless rates make it worthwhile.

As someone else said on another thread, some of the best "carrots" come in March, so if rates are low through 09 then the best time to get your 09/10 ISA could be March 2010 (having already earned more interest on your savings during the year).

chopperharris

LongTermLurker wrote: »

Yes, but as I said, if I can save into 6%, 6.3%, 7.75%, 10% and 12% accounts (less tax) there's no benefit in putting money into a much lower untaxed rate until the end of the next tax year. .

I dont know where your getting that interest , safely.Its apples and oranges when it comes to finances.I put the full amount in my isa on the 6th april every year from my "other" interest bearing account saved up the previous year....or in a lump sum from interest on another fixed interest 12 month "bond"

I think the accounts you speak are perhaps pay in , drip feeding only a limited amount , which equates to terrible rates in real terms...ie the first monthly paymnet is the only one getting 12 percent.This kind of monthly saver has been proven to be no where near beneficial , the perceived advertised interest rate is much like the woolies upto 70 percent off sale....ie not strictly true , and not entirely a lie.However if you use them in saving for the next years isa , rather than paying in , and its not heavilly taxed then for some it would be the best option.

Isas are a good way of lessening the burden of the 40 percent tax rate , soon to be 45 percent if savings interest is taking you towards the higher tax bracket....or in part of everyday joes savings if used correctly.

LongTermLurker

chopperharris wrote: »

I dont know where your getting that interest , safely.

Halifax, Egg, Barclays and A&L - as safe as any these days. As you have guessed, the top 3 are Regular Savers, but the bottom 2 are just fixed rate, instant access, few restrictions, deposit accounts that I could put £100k in if I wanted to (or had it!)

I put the full amount in my isa on the 6th april every year from my "other" interest bearing account saved up the previous year

But where does the money come from in the first place? Presumably it's earned income, so what you're suggesting is exactly the same as me - save what you can each month in a taxed account, but whereas you will put 2008's savings in on 6 April 09, I will put it in, say 1 April 10. We've both deposited a lump sum into the same tax year's allowance. The bit that isn't clear is that I have already fully subscribed in 2008, so rather than put a lump sum in at the start of 09, I'll leave that lump sum in FTD accounts until they mature and keep putting fresh cash into the RS accounts. Before tax year 10/11, I will transfer a lump sum into a 2009 ISA.

I think the accounts you speak are perhaps pay in , drip feeding only a limited amount , which equates to terrible rates in real terms...ie the first monthly paymnet is the only one getting 12 percent. This kind of monthly saver has been proven to be no where near beneficial

1) the money going in is earned income, so every penny I put in is earning maximum interest.
2) although I don't dripfeed from capital accounts, this discussion has been made loads of times. Of course subsequent months get 12%, it's 12 per cent, per annum. Forgetting compounding, £100 deposited in Jan gets £12 interest so long as it remains in the account for an annum. £100 in Feb also gets £12 interest so long as it remains in the account for an annum, but you can't leave it in that many months so you get 12 per cent for 11/12 of an annum *. People who use this method to drip feed capital in can prove that the average rate of the feeder and the RS accounts is higher than leaving it in the feeder account untouched; it's just a bit more work to set it up.

Isas are a good way of lessening the burden of the 40 percent tax rate , soon to be 45 percent if savings interest is taking you towards the higher tax bracket....or in part of everyday joes savings if used correctly.

Yes, and that's exactly what I've been saying. I'm not saying don't use your ISA allowance, I'm saying if you can get a better taxed income through the year then it's better to build up a £3600 lump sum in the hope of either a) securing a better subsequent ISA rate or b) just ensuring you put it in an ISA at the last minute.

* Edit - saying that putting the second £250 in for only 11 months doesn't equate to 12% is like putting £97 in a savings account for a year and complaining that you haven't received a full 12% interest because they haven't paid you £12 interest (compounding ignored). You wouldn't put £100 in an account for two years and say you'd received 24% interest would you? (though you might have made a 24% gain). It's 12% of what you give them for as long as you give it.

YorkshireBoy

chopperharris wrote: »

This kind of monthly saver has been proven to be no where near beneficial...

Citation please?