PSA and ISA allowance- time for gov change?

boingy

I think that as rates increase the amount of "lost tax income" from the £1000/£500 PSA will come under ever increasing scrutiny.

 

kuratowski

I think the selling point of the PSA from a government perspective is the administrative savings from not having to chase people for tax on small amounts of interest income.  My vote would go to simplifying it even further, and setting the PSA to be the same amount for all (but then I would say that, wouldn't I )

The £20k ISA allowance however, is amazingly generous, and could well be reined in.  As people are now benefiting from savings rates of 5-6%, after so many years at 0-1%, paying some income tax is not the end of the world.

PixelPound

Allowing those who save enough the PSA is a concern to get more tax free won't take money out of the spending economy, as these people are inclined to save anyway. What you need to do is incentivise those who spend to save more. So stuff that targets those well under the PSA, e.g. a regular saver with a high rate as over the year they don't account for much interest (due to relatively low balances) but the headline rate make it appealing.

Albermarle

Eirambler said:

Albermarle said:

Doctor_Who said:

CaptainWales said:

Anybody else think that if the government really wants to encourage saving and lower inflation they should up the current PSA and ISA allowance? 

It would be nice, but I can't see it happening. The UK already has generous tax allowances for savings.

As above. The average German or Irishman would be over the moon to have the savings interest tax breaks we have in the UK.

This is true. All savings in Ireland are taxed at 33%. No tax free allowance before it kicks in either. Even children's accounts are fully taxed. The top easy access savings pay less than 0.25% - before tax. Fixed savings generally pay about 1% before tax (so 0.67% in reality). The Irish equivalent of Premium Bonds (known as prize bonds) has a tax free prize rate of 0.35%.

That is even more onerous than I thought.
Presumably this is why, many in the Republic  also  have bank accounts in Northern Ireland, but I think Brexit has put a stop to any new accounts being opened.

Eirambler

Albermarle said:

Eirambler said:

Albermarle said:

Doctor_Who said:

CaptainWales said:

Anybody else think that if the government really wants to encourage saving and lower inflation they should up the current PSA and ISA allowance? 

It would be nice, but I can't see it happening. The UK already has generous tax allowances for savings.

As above. The average German or Irishman would be over the moon to have the savings interest tax breaks we have in the UK.

This is true. All savings in Ireland are taxed at 33%. No tax free allowance before it kicks in either. Even children's accounts are fully taxed. The top easy access savings pay less than 0.25% - before tax. Fixed savings generally pay about 1% before tax (so 0.67% in reality). The Irish equivalent of Premium Bonds (known as prize bonds) has a tax free prize rate of 0.35%.

That is even more onerous than I thought.
Presumably this is why, many in the Republic  also  have bank accounts in Northern Ireland, but I think Brexit has put a stop to any new accounts being opened.

In Ireland now the best approach is to save with European banks in countries that also use the Euro. There is a company called Raisin that facilitates this across the Eurozone. Returns are still subject to Irish savings tax though.

In terms of the UK rates I would expect that any proposals to reduce the tax free limits would leave the government open to criticism of fueling inflation by encouraging savers to spend. So it seems unlikely. However any changes in the other direction may lead to criticism for helping savers over mortgage holders. So they may well just leave things as they are.

CompulsiveSaver

Well since they have done such a dire job of controlling inflation.. yes, we know that Monetary policy is "allegedly" down to the BOE, but the government has done little (if anything) to reduce fiscal inflation that is within their control.

I think both PSA and ISA allowances should increase with inflation, mainly as it will be an incentive to keep inflation under control! (So don't say it is temporary when the MPC only looks at a one year time frame so it is inevitable things will fall out of their perspective after 12 months...), but then of course that would benefit me, which is the point of a question like this, your answer will be dependant to result on your finances!

MK62

It'd be a tough sell to justify raising PSA and ISA allowances while the personal allowance remains frozen.......

CompulsiveSaver

MK62 said:

It'd be a tough sell to justify raising PSA and ISA allowances while the personal allowance remains frozen.......

As I said above, it would benefit me so it would be easy to justify to me and millions of other savers... Any change will annoy someone, this one might be more likely to get a few more votes, and if not it this lot don't get back in then the other lot will have to deal with it!

jimjames

CaptainWales said:

Anybody else think that if the government really wants to encourage saving and lower inflation they should up the current PSA and ISA allowance? 

How can the average person earning £25k or so fill an ISA every year? I can't see any rationale for increasing the limits.

aaj123

Yorkie006 said:

I'd prefer an increase of the personal allowance - that would benefit the lower earners more than increase in PSA/ISA limit - increasing those would only benefit the people who don't really need the extra money. Let's face it, most people these days don't have £20k to save anyway...

But folks on this board quite commonly have the nice problem of having to figure out where to stash many years worth of full allowance use.