Could the government raise the limit for tax free savings?

RG2015

Dazed_and_C0nfused said:

I suspect there is some confusion on the subject of this thread.

The op was referring to non taxable interest I.e. Cash ISA's.

Not taxable interest.  Which might get taxed at 0% but still increases some people's overall tax liability.

would it be a good idea for the UK government (which has been doing such a sterling job of managing the UK economy recently ;-) ) to raise the current limit on non-taxable savings interest?

I agree with @refuxer. The OP is referring to the PSA not the annual ISA limit. I know you are correct that the PSA is a 0% tax concession and not a tax free allowance.

However I respectfully suggest that 99% of the UK population consider the PSA to be a tax free allowance. The English language is fluid and context and general usage is every bit as important as precise accuracy.

That said, I would hate it if you stopped gracing these pages with posts that are guaranteed to be precise and correct.

Daliah

cricidmuslibale said:

Albermarle said:

AIUI, the UK Has some of the better tax breaks in the world for savings already. Being able to shelter £20K a year in an ISA would be a dream for most Europeans at least.

The crucial issue with this is that interest rates on cash ISAs, both fixed and easy access, tend to be c 20 - 25 percent lower than the equivalent non ISA accounts, thus negating any tax saving you would otherwise and really probably should obtain!

Not for HR tax payers though

Yellowman

It would make sense to change the phrase 'Personal Savings Allowance' to 'Personal Interest Allowance'.

Dazed_and_C0nfused

RG2015 said:

Dazed_and_C0nfused said:

I suspect there is some confusion on the subject of this thread.

The op was referring to non taxable interest I.e. Cash ISA's.

Not taxable interest.  Which might get taxed at 0% but still increases some people's overall tax liability.

would it be a good idea for the UK government (which has been doing such a sterling job of managing the UK economy recently ;-) ) to raise the current limit on non-taxable savings interest?

I agree with @refuxer. The OP is referring to the PSA not the annual ISA limit. I know you are correct that the PSA is a 0% tax concession and not a tax free allowance.

However I respectfully suggest that 99% of the UK population consider the PSA to be a tax free allowance. The English language is fluid and context and general usage is every bit as important as precise accuracy.

That said, I would hate it if you stopped gracing these pages with posts that are guaranteed to be precise and correct.

Thanks 😊.

Not 99% I'm sure but the PSA is of absolutely no use whatsoever so a significant number of people.

And for some of those who can benefit finding £500 interest taxed at 0% actually adds £100 to their liability (PA taper) isn't any different to paying basic rate tax on it!

RG2015

Dazed_and_C0nfused said:

RG2015 said:

Dazed_and_C0nfused said:

I suspect there is some confusion on the subject of this thread.

The op was referring to non taxable interest I.e. Cash ISA's.

Not taxable interest.  Which might get taxed at 0% but still increases some people's overall tax liability.

would it be a good idea for the UK government (which has been doing such a sterling job of managing the UK economy recently ;-) ) to raise the current limit on non-taxable savings interest?

I agree with @refuxer. The OP is referring to the PSA not the annual ISA limit. I know you are correct that the PSA is a 0% tax concession and not a tax free allowance.

However I respectfully suggest that 99% of the UK population consider the PSA to be a tax free allowance. The English language is fluid and context and general usage is every bit as important as precise accuracy.

That said, I would hate it if you stopped gracing these pages with posts that are guaranteed to be precise and correct.

Thanks 😊.

Not 99% I'm sure but the PSA is of absolutely no use whatsoever so a significant number of people.

And for some of those who can benefit finding £500 interest taxed at 0% actually adds £100 to their liability (PA taper) isn't any different to paying basic rate tax on it!

Once again I am humbled for not fully considering the things I say.

The percentage of those earning anywhere near £1,000 per year in interest must be very low.

older_and_no_wiser

refluxer said:

Come on - it might not have been precisely worded, but I'm pretty sure from the context that the OP was referring to the PSA

 I was referring to the personal savings allowance. I couldn't remember the wording/acronym for this when I posted. Apologies for any confusion.

The point I was trying to make is that it would encourage more people to save more if there was less threat of taxation on savings. It may encourage people to save more for home purchases and also bring down inflation if there's less money being spent and more being saved. I take the point about the ISA allowance. In reality though, how many "normal" (ie not those in this forum!) people are aware of ISAs and what their allowance is each year? 

Albermarle

southone said:

I was only talking to someone last week about this very point who could see the government pushing the tax free allowance on savings up to five thousand and doing away with ISAs altogether

There could be some mileage in simplifying the system as you suggest for Cash ISA's, although no doubt the devil would be in the detail regarding ISA money already held.
On the other hand doing away with other types of ISA would just bring a lot of complication with little reward.

Beddie

What_time_is_it said:

Beddie said:

There is zero chance of that happening in the near future, as tax rises will be the order of the day, not cuts. It would also be seen as helping "the rich" in this stupid 'politics of envy' country we live in.

Well, it totally would be helping the rich wouldn't it? The idea of the government choosing to reduce a tax for people with over £50k of savings right now is totally laughable.

I get your point, but when people talk about "the rich" that should not mean "the not poor." Anyone in their 50s or 60s who's had an ordinary job can still easily have quite a large amount of savings, if they have been sensible and saved. I consider the rich as people earning over £100k, or have million pound houses etc. Not people who have saved for their future instead of spending it all.

I guess we all have a line we draw between rich/average/poor. Growing up in the 70s, we regarded anyone who had a colour telly as rich!

RG2015

older_and_no_wiser said:

Just a thought, but would it be a good idea for the UK government (which has been doing such a sterling job of managing the UK economy recently ;-) ) to raise the current limit on non-taxable savings interest?

Before the current interest rate hikes, one had to have a huge amount of savings before hitting the tax limit. Now with 3/4/5% rates being so common, you can soon hit that taxable amount on the interest earned. 

I would think raising the limit could be a good policy in trying to reduce inflation by encouraging people to save more rather than spending.

I would be happy to avoid paying tax on my savings interest.

However, I doubt that many would spend less if tax free allowances (or 0% tax concessions) were increased.

cricidmuslibale

talexuser said:

Yes, worry about a few crumbs of savings interest when your personal allowances have been fixed for years in the times of rampant inflation making you lose hundreds of pounds a year due to the fiscal drag which would not be the case in any other government that stuck by Rooker/Wise.

This is actually a very valid point! Especially as far as the current £12570 personal allowance being frozen until 2026 is concerned! I really do think this will become increasingly unjustifiable over the next few years if this freeze is not ended asap and the personal allowance is allowed to rise annually by the rate of increase of average earnings at least, assuming the Government can’t afford at present to increase the PA in line with the CPI inflation rate.