ISAs - for a limited time only?

arumiat

Hi , I picked up the vibe somewhere that ISAs will only be around until 2009/2010 when either a) unless you already hold an ISA you cannot invest in them anymore, - theyve been scrapped b) the amount of money you can put in for instance to a cash mini ISA will be reduced i.e. £2000 instead of £3000 per tax year. Can anyone shed any light on the situation, i have a feeling Im getting the wrong end of the stick. As a student and nontaxpayer I dont consider it worth my while investing in an ISA as I dont pay tax anyway however if the above were true it would be well worth my while investing as much as possible now so that it will be tax free in future years when I do become a tax payer and theyve been 'a) scrapped b) reduced in the amount of £ one can put in'.

Cheers

isasmurf

The current situation is that ISAs, in their current form, are guaranteed to be around until 2009/10. After that, who knows? When ISAs were launched they promised a review "by 2006" as to what would happen after 2009 (when the original ISA guarantee period ended - it was extended a year to 2010 last year.)

No review was announced in the Budget, I guess we will probably have to wait for it.

cheerfulcat

Hi, arumiat,

It is a mistake to make investment decisions based on your circumstances today, with no thought to tomorrow, especially if you are currently not a taxpayer but may be in the future. As a general rule, it is a good idea to use tax wrappers where they are available. ISAs may or may not be around for a while yet but remember that tax-free investing is a relatively new concept in the UK, having been first introduced in 1987 ( PEPs ) by the Tories and being under threat by the current Chancellor.

Cheerfulcat

Milarky

As Isasurf suggests, they now rolling these end dates to ISAs over into the future. Which is political as much as economic ("tomorrow never comes") It is staggering how Gordon Brown dealt with the imminent change in cash ISA annual limits from 3K down to 1K in April this year - he simply left it until the last possible moment - claiming he was 'consulting' (as if anyone would have written in and said: "No, I think you should cut the annual allowance Mr Chancellor!") and then announced in (I think) the Autumn statement in November that he would, after all, be keeping the status quo.

(I thought it was rich, too, of the likes of Nationwide to ask for 'more' based on spurious arguments about the 'effects of inflation' on the £3000 level since 1999:See here for some choce observations: )

http://www.nationwide.co.uk/mediacentre/PressRelease_this.asp?ID=524

http://www.nationwide.co.uk/mediacentre/PressRelease_this.asp?ID=528

http://www.nationwide.co.uk/mediacentre/PressRelease_last.asp?ID=755

http://www.nationwide.co.uk/mediacentre/PressRelease_this.asp?ID=809

However, whatever the next Chancellor decides to do about this it is highly likely (politically, near certain) that they won't take the tax-free status off the amounts of savings already accumulated. That was how they handled existing PEPs and TESSAs after not initially mentioning them (because they were 'Tory' and not 'Labour' vehicles) - they kept what they already had.

ManAtHome

Just to add to cheerfulcat's post - the rates on cash ISAs are close to savings accounts anyway - you might lose a few quid now when you're not paying tax but more than make up for it later. Remember they're not 'dipping in and out' accounts though - max you can put in during a tax year is £3k - if you start with £3k in April then withdraw £1k for your hols in August, you can't put it back in... ever (although you'll have another £3k allowance the next tax year).