Will ISAs be raided to pay for Covid?

Type_45

The whole point of my ISA was to avoid tax. Now I am reading that the government may tax them.

How likely is this? How much would it be? What can we do? 

Alexland

I consider it very unlikely. In politics there is the tendency to oversimplify economic situations and compare them to a household budget which is more relatable to the average voter. After the 2008 we saw a similar rhetoric about how austerity was required to balance the deficit which never happened and we are still here. The truth is that with lower interest rates the debt is more affordable and the government has always used inflation to gradually soft-default on their debts as they become less valuable each year. More likely they might make a few targeted tax rises (most likely capital gains), trimming of future allowances and maybe public sector pay restraint (but not on nurses or teachers) to show willing to the bond market lenders.

Type_45

Thank you for that 😊

What do you think about the possibility of taxing people's primary residence? This is another thing I've read.

Albermarle

The whole point of my ISA was to avoid tax

Usually the main point is to save/make  money . The tax shelter is just the icing on the cake .

In any case it depends what type of ISA you mean ? For most people cash ISA's are redundant nowadays , although a lot of people still use them unnecessarily.

What do you think about the possibility of taxing people's primary residence? This is another thing I've read.
Where have you been reading this stuff ?

Type_45

Albermarle said:

The whole point of my ISA was to avoid tax

Usually the main point is to save/make  money . The tax shelter is just the icing on the cake .

In any case it depends what type of ISA you mean ? For most people cash ISA's are redundant nowadays , although a lot of people still use them unnecessarily.

What do you think about the possibility of taxing people's primary residence? This is another thing I've read.
Where have you been reading this stuff ?

You've not heard any mention of wealth tax in the press? 

Google it and click on news

dunstonh

Now I am reading that the government may tax them.

There has been no hint of that in the financial press or serious press and the Government have not said anything.  These sorts of rumours tend to come from think tanks (which rarely end up as policy) or just made up opinion pieces designed to scaremonger.  The media has an awful track record when it comes to predicting what may or may not happen.

How likely is this?

It is highly unlikely that a specific tax wrapper would be targetted as it would be disproportionate to overall wealth.  Your use of a tax wrapper does not necessarily reflect your level of wealth.     Someone with 10 buy to lets could have more wealth than someone with £20,000 in an ISA.    Targetting just ISAs would daft and more politically damaging than a wealth tax.

The country has been in a worse financial state and it didn't implement a grab then.

There have been suggestions of a wealth tax but that is unlikely under a Conservative government.   However, this government is one of the most socialist governments there has ever been  (ironically as it is certainly not their intention).  If there was, it would be on whole wealth, probably excluding the primary residence and pensions (pensions already have a wealth tax on them and they are not technically owned by you) and set very high (500k to 1mil+ level)

It is more likely that there will be incentives to spend money and increases in NI for the self employed and possibly company directors.  Then let inflation get a bit higher and erode the debt over the decades.    This is something the UK and the US have done before.  However, anything you read is pure guesswork.   We cannot tell what they will do but it is pretty easy to guess that targeting ISAs specifically isn't going to happen.

Alexland

dunstonh said:

It is more likely that there will be incentives to spend money and increases in NI for the self employed and possibly company directors.

Yes this seems very likely as there seems to be resentment at the Treasury for being pushed into providing any covid income support for those paying lower NI rates. Even the normal NI rates are a bargain compared to the value they can provide in SP income.

eskbanker

Type_45 said:

Albermarle said:

The whole point of my ISA was to avoid tax

Usually the main point is to save/make  money . The tax shelter is just the icing on the cake .

In any case it depends what type of ISA you mean ? For most people cash ISA's are redundant nowadays , although a lot of people still use them unnecessarily.

What do you think about the possibility of taxing people's primary residence? This is another thing I've read.
Where have you been reading this stuff ?

You've not heard any mention of wealth tax in the press? 

Google it and click on news

Better still, just use the existing thread on here to read (preferably) or write (if you must) about a possible wealth tax: https://forums.moneysavingexpert.com/discussion/6223045/tax-on-wealth-suggested/p1