Proposed £100k ISA lifetime limit

Sea_Shell

Qyburn said:

InvesterJones said:

Making it purely based on a 100k contribution limit rather than value of the contents would make it far easier to track/keep records too. I d of calculation already done for CGT.

Do HMRC have records of all contributions made to date? I know I don't and am not sure I could even work out where to look for the data.

I have that info since we've been investing (2010), but not from back in our cash ISA (Tessa) days.  Money went in, money came out and was spent.  

So I'd have no way of checking any "lifetime" figures they held were correct.


We'd likely be well within any lifetime deposit allowance of £100k though.

mebu60

masonic said:

jimjames said:

masonic said:

In practice this would be a complete nightmare to implement. ISA allowance is effectively dependent on the total you have saved and invested across the ISAs you hold, which for many people will fluctuate from one day to the next. 

I agree but it's something the government have in place for pensions with the lifetime allowance and the annual contribution limits so it is technically possible to put something in place. Not suggesting that it is a good idea at all but the limit of £20k per year does seem pretty generous in comparison to other countries.

While I wouldn't describe the pension LTA as an elegant solution, it works quite differently than what is being suggested here, and the product is more amenable to such meddling. ISAs are designed to be easy access and don't benefit from tax relief (which conceptually is what is being clawed back by the pensions LTA). All that is being proposed (if I am reading correctly) is to stop people from contributing more cash while they are above £100k across their ISAs, not pierce the tax free wrapper. As part of a major overhaul, where ISA managers moved to live reporting and the annual allowance was centrally controlled in real time, this could be workable, remove the possibility of people making mistakes and oversubscribing, and remove the need for a one ISA of each type rule. Though I doubt there would be a net saving after all of that infrastructure was paid for.

Agree that the annual allowance is high and if the lost tax revenue is a concern, it would be better to set this at an appropriate level rather than retaining a situation whereby someone could hit the cap within 5 years.

I got told off for calling it a proposal / being proposed rather than a suggestion / being suggested! 

Agree with what you're saying. Also what Anonymous101 said:
I don't disagree that wealth inequality is a huge issue and requires some careful thought to address. I do feel as though taxing savings or introducing wealth taxes in other ways not only try to treat the symptom rather than the cause but they overly punish those in middle classes which have chosen to save / invest rather than spend. Its as much a lifestyle choice tax as a wealth tax for me which the truly wealthy will avoid - agreed spoke as a relatively comfortable middle class saver.
The focus has to be on taxation of top few percent income individuals and redistribution to those at the bottom. I'm thinking those with nett worth's in the tens of millions and above rather than those with a few hundred grand in an ISA.

jimjames

Albermarle said:

It could be worth noting that in many similar countries, there is much less scope for avoiding tax on savings interest.
Germans, French, Irish etc would be over the moon to be able to stash £100k away tax free.

Or even over a million if you've invested well in your ISAs! To have the ability to stash £20k away for 40+ years and it all remain free of tax is quite a allowance being given away. Someone could get £30k annual income from that ISA and it be totally outside tax. Admittedly it's probably quite unusual for an ISA to be that big but plenty are going to be over £500k.

InvesterJones

eskbanker said:

masonic said:

Withdrawals ought to be taken into account. Otherwise it would be rather unfair on someone who had saved up £100k over a decade or more and used it to buy their first home, only to find they can never contribute to an ISA again.

Surely rule #1 of any sort of initiative like this is that it can never be implemented in such a way as to be fair to everyone - someone will always be disadvantaged relative to others?

No system is perfect, but some very clever people spend a lot of time trying to make things as good as they can be. You can already see how ideas iterate in just a few posts from random people on the internet.

Due to general reluctance to retrospectively apply regulations, it might be simpler to state any change would only apply to contributions at some point in the future. Say 100K from 2025. Then since govt. also want to help people save for a house (rather than depress house prices) you could exempt things like LISAs etc.

Sea_Shell

jimjames said:

Albermarle said:

It could be worth noting that in many similar countries, there is much less scope for avoiding tax on savings interest.
Germans, French, Irish etc would be over the moon to be able to stash £100k away tax free.

Or even over a million if you've invested well in your ISAs! To have the ability to stash £20k away for 40+ years and it all remain free of tax is quite a allowance being given away. Someone could get £30k annual income from that ISA and it be totally outside tax. Admittedly it's probably quite unusual for an ISA to be that big but plenty are going to be over £500k.

In the early years the limits were much lower though.

What is the maximum contribution that could've been made, including Tessa's, from inception to now (excluding growth)?

Altior

mebu60 said:

masonic said:

jimjames said:

masonic said:

In practice this would be a complete nightmare to implement. ISA allowance is effectively dependent on the total you have saved and invested across the ISAs you hold, which for many people will fluctuate from one day to the next. 

I agree but it's something the government have in place for pensions with the lifetime allowance and the annual contribution limits so it is technically possible to put something in place. Not suggesting that it is a good idea at all but the limit of £20k per year does seem pretty generous in comparison to other countries.

While I wouldn't describe the pension LTA as an elegant solution, it works quite differently than what is being suggested here, and the product is more amenable to such meddling. ISAs are designed to be easy access and don't benefit from tax relief (which conceptually is what is being clawed back by the pensions LTA). All that is being proposed (if I am reading correctly) is to stop people from contributing more cash while they are above £100k across their ISAs, not pierce the tax free wrapper. As part of a major overhaul, where ISA managers moved to live reporting and the annual allowance was centrally controlled in real time, this could be workable, remove the possibility of people making mistakes and oversubscribing, and remove the need for a one ISA of each type rule. Though I doubt there would be a net saving after all of that infrastructure was paid for.

Agree that the annual allowance is high and if the lost tax revenue is a concern, it would be better to set this at an appropriate level rather than retaining a situation whereby someone could hit the cap within 5 years.

I got told off for calling it a proposal / being proposed rather than a suggestion / being suggested! 

Agree with what you're saying. Also what Anonymous101 said:
I don't disagree that wealth inequality is a huge issue and requires some careful thought to address. I do feel as though taxing savings or introducing wealth taxes in other ways not only try to treat the symptom rather than the cause but they overly punish those in middle classes which have chosen to save / invest rather than spend. Its as much a lifestyle choice tax as a wealth tax for me which the truly wealthy will avoid - agreed spoke as a relatively comfortable middle class saver.
The focus has to be on taxation of top few percent income individuals and redistribution to those at the bottom. I'm thinking those with nett worth's in the tens of millions and above rather than those with a few hundred grand in an ISA.

It's quite a curious outlook. There will always be individuals at the top with tens of millions of wealth (on paper). So what do people actually want? Their assets stripped and handed out to people who don't want to work? Until nobody still living in the country has that kind of theoretical wealth? It would be problematic for those owning properties that are valued over a few million. I guess the state could always confiscate them. 

Qyburn

Sea_Shell said:data.

I have that info since we've been investing (2010), but not from back in our cash ISA (Tessa) days.  Money went in, money came out and was spent.  

So I'd have no way of checking any "lifetime" figures they held were correct.

.

That raises the question of whether TESSA savings would be included, taking it back to 1990 onwards. And PEP for that matter. That's a side issue for us as both were too restrictive for us at that stage, but we have had ISAs since they were first introduced. 

eskbanker

InvesterJones said:

eskbanker said:

masonic said:

Withdrawals ought to be taken into account. Otherwise it would be rather unfair on someone who had saved up £100k over a decade or more and used it to buy their first home, only to find they can never contribute to an ISA again.

Surely rule #1 of any sort of initiative like this is that it can never be implemented in such a way as to be fair to everyone - someone will always be disadvantaged relative to others?

No system is perfect, but some very clever people spend a lot of time trying to make things as good as they can be.

Maybe HMRC could recruit some of them....

jimjames

Sea_Shell said:

jimjames said:

Albermarle said:

It could be worth noting that in many similar countries, there is much less scope for avoiding tax on savings interest.
Germans, French, Irish etc would be over the moon to be able to stash £100k away tax free.

Or even over a million if you've invested well in your ISAs! To have the ability to stash £20k away for 40+ years and it all remain free of tax is quite a allowance being given away. Someone could get £30k annual income from that ISA and it be totally outside tax. Admittedly it's probably quite unusual for an ISA to be that big but plenty are going to be over £500k.

In the early years the limits were much lower though.

What is the maximum contribution that could've been made, including Tessa's, from inception to now (excluding growth)?

Based on ISAs only the total is £286560 according to this site

https://www.cushon.co.uk/info/knowledge/how-much-is-my-isa-allowance

Albermarle

One further possible consequence, is that detailed record keeping could be required by anyone investing in a S&S ISA, since there would no longer be a guarantee that disposals would be free of CGT implications.

I think this point is also important. As we see on this forum many new investors are already quite wary/uninformed about investing. If investing meant a lot of complicated paperwork as well, it would put many off completely.