Proposed £100k ISA lifetime limit

Eco_Miser

jimjames said:

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

And the maximum TESSA that could transfer over is £9000, making £295560 in all.

Cus

Maybe they could stop ISAs going forward and allow the same amount per year in premium bonds. That way the government can use it..

masonic

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?

Indeed, and the way something is implemented is often so as not to disadvantage groups who vote in large numbers, so perhaps this group is fair game. But making an ISA of most benefit to those who are able to save £100k and not dip into it doesn't seem to be moving in the direction advocated by the report.

coastline

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)?

The PEP/ISA allowance has always been similar taking into consideration the £20,000 limit today. It's been a steady increase for decades.

Historical Annual ISA Allowances | The Motley Fool UK

ISA History l ISACO

The £9,000 quote in 1991 in one of the above links is just short of £19,000 in todays money allowing for inflation. More than three decades ago that and I don't remember any problems then.

Inflation calculator | Bank of England

Investors have been taxed on the way in to start with. Looking at interest rates (set the chart to 25 years) we're still way short of the 2008 levels of 6%. It was after this period and the GFC that rates slumped to near zero for a long period and it made little or no difference to cash savers with or without tax at source. 

 United Kingdom Interest Rate - 2023 Data - 1971-2022 Historical - 2024 Forecast (tradingeconomics.com)

While they're at it tinkering with allowances etc they should lift the IHTax threshold from £325K. Again something that's been frozen for many years. Gets overlooked but single people also have families to leave money to in their will. A smallish house will cost more than that . Even ex local authority houses are over £200K in most of the UK.

masonic

Cus said:

Maybe they could stop ISAs going forward and allow the same amount per year in premium bonds. That way the government can use it..

Issue with that is that Premium Bonds are a poor long-term investment, and much of the time a poor short-term savings vehicle for basic rate taxpayers. Not to mention the implications for those of certain faiths.

jimjames

Eco_Miser said:

jimjames said:

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

And the maximum TESSA that could transfer over is £9000, making £295560 in all.

Although PEPs could have been used which would have boosted the amount even more

EthicsGradient

coastline said:

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)?

The PEP/ISA allowance has always been similar taking into consideration the £20,000 limit today. It's been a steady increase for decades.

Historical Annual ISA Allowances | The Motley Fool UK

ISA History l ISACO

The £9,000 quote in 1991 in one of the above links is just short of £19,000 in todays money allowing for inflation. More than three decades ago that and I don't remember any problems then.

Inflation calculator | Bank of England

Investors have been taxed on the way in to start with. Looking at interest rates (set the chart to 25 years) we're still way short of the 2008 levels of 6%. It was after this period and the GFC that rates slumped to near zero for a long period and it made little or no difference to cash savers with or without tax at source. 

 United Kingdom Interest Rate - 2023 Data - 1971-2022 Historical - 2024 Forecast (tradingeconomics.com)

While they're at it tinkering with allowances etc they should lift the IHTax threshold from £325K. Again something that's been frozen for many years. Gets overlooked but single people also have families to leave money to in their will. A smallish house will cost more than that . Even ex local authority houses are over £200K in most of the UK.

If you look carefully, you'll see those links show a significant increase. The £2,400/year in a PEP in 1987 would now be £6,367. The £6,000 in 1990 would be £13,608. If you include the single company PEP from 1992, that would be £18,214, but that was not increased - by 1998 that's £16,022, and then £7,000 for an ISA in 1999 is £12,298. Rather than a steady increase, that was only increased to £7,200 in 2008, and then they farted about with age-dependent  amounts for a year. When sorted, it was £10,200 in 2010 (£14,451 now). And then there were sudden increases in 2014 and 2017 to £15k and £20k.

Note that the £9,000 for a TESSA was the maximum total contribution over 5 years - and you couldn't add to the capital amount after 5 years.

ayvan

£100,000 is rich? You can not buy a barn for £100,000. In UK it is not clever to work and earn and save for normal person. Better live the life, you can be lazy and spend everything and then ask government for money. Half your work is tax to pay for lazy.

Anonymous101

Altior said:

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. 

Absolutely not. I’m not quite sure why some people always have to bring these types of discussions back to “handouts for the workshy”?
Its pretty clear to most people that’s there’s a big issue with public service funding in this country. Added to that we’re in a situation where hardworking people on average salaries are struggling to make ends meet. Surely they would be better areas to focus on?

Its really odd to me that you’d think it it unfair that those spending tens of millions on properties they never live in, hundreds of thousands on watches or tens of thousands on a night in a hotel can’t afford to pay more tax somewhere along the line. In fact they probably paid much less tax on that income in the first place.

Perhaps one possible solution would be a tiered taxation system on dividends much like income tax but with higher thresholds?

Albermarle

ayvan said:

£100,000 is rich? You can not buy a barn for £100,000. In UK it is not clever to work and earn and save for normal person. Better live the life, you can be lazy and spend everything and then ask government for money. Half your work is tax to pay for lazy.

In other countries they can only dream of protecting so much savings interest from tax. The UK has a very generous system for people to earn interest tax free. Plus the interest on offer from some banks is also better than offered in many other countries. Even if this suggestion to limit ISA's to £100K ever sees the light of day, there is still the Personal savings allowance, before any tax on interest would be paid.