ISA reforms confirmed for 2008

cheerfulcat

Exactly the same as before, £3000 - though it doesn't say that in the press release.

masonic

cheerfulcat wrote:

No. Under the new rules, you will be able to swap a cash ISA for a S&S one but not the other way about, which is not really very useful. What would have been good is the ability to switch at will between the two but that's not going to happen, for the reason Geoffo gave.

I realise that. I suppose I was misinterpreting Geoffo M's post.

I guess I can't get my head around why anyone so averse to holding S&S in an ISA would have any to convert to cash in the first place, or why being allowed to convert cash to S&S would make any difference to them. I could understand someone being upset that you can't put £7000 straight into a cash ISA, despite being able to with S&S, but that's always been the case.

cheerfulcat

Hi, masonic,

There are times - such as in a market downturn - when it would be nice to be able to sell shares and sit in cash for a while. Most brokers will allow you to do this but the interest in S&S ISAs tends to be lousy ( like ~0.75% ) and is of course taxed. The benefits of being able to switch between cash and stock market investments would be great, to many people.

isasmurf

gt94sss2 wrote:

I had hoped for this year..

It appears 2008 was chosen at the request of the industry.

From PIMA Press release

Tony Vine-Lott, Director General of PIMA said,

‘We are pleased that the Government has clarified when the ISA changes will be implemented. We have enjoyed a very constructive dialogue with the Minister and officials about what was possible from providers and what would benefit consumers most. This date was overwhelmingly favoured by our members and we appreciate the Government’s consideration of their views. We look forward to continued work with the Government on the details of the transition.’

masonic

cheerfulcat wrote:

There are times - such as in a market downturn - when it would be nice to be able to sell shares and sit in cash for a while. Most brokers will allow you to do this but the interest in S&S ISAs tends to be lousy ( like ~0.75% ) and is of course taxed. The benefits of being able to switch between cash and stock market investments would be great, to many people.

cheerfulcat,

I think we are on the same page. I agree switching in both directions would be useful, not only for the reason you suggest, but also as the ultimate destination for someone wishing to reduce their exposure to risk.

Coming back to what I said above, I can't understand why someone who has an aversion to holding S&S in an ISA would have any to convert to cash in the first place. That is the reason I had assumed Geoffo M was referring to new contributions rather than existing ones.

EdInvestor

Geoffo_M wrote:

The stocks/shares isa is meaningless for all but the very large investors anyway.

Well it shouldn't be.You can put bonds gilts and property funds in there as well as shares, and these types of investments are especially important to retired people and for long term saving.If you don't use your ISA you will pay 20% tax on these investments. Cash is useless for long term saving.

Each year, you receive your capital gains allowance, so it is over and above the £8,300 (or whatever the figure is these days).

The allowance for *realised* capital gains is now just under 9k. You have to actually *sell shares worth more than this* to incur any tax liability.Just making the paper gain doesn't count.

And he quickly removed making dividends free of tax

Dividends come with a notional tax credit attached which means there is nothing more to pay for those on basic rate - and 25% for those on higher rate (which is better than the 40% payable on cash, bonds and property income)

Thus these days for basic rate taxpayers, it may be better to hold shares and equity unit trusts direct, and use your investment ISA for property or bond investments. (Slightly different considerations may apply if you are at or near retirement age.).

dunstonh

It appears 2008 was chosen at the request of the industry.

It was left too tight to get it changed in time for this coming tax year. The industry has a number of valid complaints against the Govt at the moment for making last minute changes or U turns which have cost it a fortune.

cheerfulcat

EdInvestor wrote:

Dividends come with a notional tax credit attached which means there is nothing more to pay for those on basic rate - and 25% for those on higher rate (which is better than the 40% payable on cash, bonds and property income)

You miss the point that it used to be possible to reclaim the dividend tax credit within pension and PEP wrappers, and even outside of wrappers if one was not a taxpayer.

Bazn

anyone know what implications the new rules have for using more than one ISA provider? as in could you put £1500 in one cash isa, and £1500 in another cash isa with a different company?

thanks

david78

I doubt you will be able to split the cash part between two providers.

What the new arrangements will mean is that up to £3000 will be able to go into a cash ISA, and the balance (up to a total of £7000) can go into a stocks and shares ISA. These can be with different providers, so you can put

£3000 in cash, £4000 in stocks and shares, or
£1500 into cash, and £5500 into stocks and shares, or
£7000 in stocks and shares, etc.

I expect there will be some rising of the investment limits with time, but this will only be for the stocks and shares component. This is because the government want to encourage us to invest and discourage us from saving.