PSA and ISA allowance- time for gov change?

DavidAC

Since no savings accounts pay anywhere near the rate of inflation, taxing savings interest is taxing a loss into an even bigger loss. Not very ethical or fair in my opinion. The government and media seem to have the opinion that those with savings can afford t loose them, those with debt should be helped. So why save in the first place.

PixelPound

DavidAC said:

Since no savings accounts pay anywhere near the rate of inflation, taxing savings interest is taxing a loss into an even bigger loss. Not very ethical or fair in my opinion. The government and media seem to have the opinion that those with savings can afford t loose them, those with debt should be helped. So why save in the first place.

Cash savings rarely outstrip inflation. I believe they haven't over last few decades, and under 1% since 1900

Albermarle

DavidAC said:

Since no savings accounts pay anywhere near the rate of inflation, taxing savings interest is taxing a loss into an even bigger loss. Not very ethical or fair in my opinion. The government and media seem to have the opinion that those with savings can afford t loose them, those with debt should be helped. So why save in the first place.

You could ask in what theoretical position you would prefer to be in.

£100K in savings , and paying some tax ( probably a few hundreds at most with all the ISA and PSA tax free ) 

£100K in debt 

Since no savings accounts pay anywhere near the rate of inflation, taxing savings interest is taxing a loss into an even bigger loss

On the other hand savers have done a lot better than investors in the last 18 months !

wmb194

nic_c said:

DavidAC said:

Since no savings accounts pay anywhere near the rate of inflation, taxing savings interest is taxing a loss into an even bigger loss. Not very ethical or fair in my opinion. The government and media seem to have the opinion that those with savings can afford t loose them, those with debt should be helped. So why save in the first place.

Cash savings rarely outstrip inflation. I believe they haven't over last few decades, and under 1% since 1900

No, historically they've earned a real return of between 1 and 2%. Obviously some periods have been better than others, though, and it's easier to achieve if you make the effort to chase the best rates. A good example of a good time is at the beginning of the financial crisis in c.2008/09 where RPI turned c.-1% (minus one) but it was easy to find 6.5%+ one year fixed rate savings bonds from the likes of Nationwide and other big names.

aaj123

boingy said:

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

 

What on earth is that perspective? To take away some of earned income is how taxation is implemented. To say that some tax was lost is like saying there is a god given right. And what right is that? To tax 100%? Then any tax rule comes under scrutiny for allowing you to take some of your income for yourself. 

boingy

aaj123 said:

boingy said:

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

 

What on earth is that perspective? To take away some of earned income is how taxation is implemented. To say that some tax was lost is like saying there is a god given right. And what right is that? To tax 100%? Then any tax rule comes under scrutiny for allowing you to take some of your income for yourself. 

You've entirely misunderstood. The perspective was that of a Chancellor looking for ways to boost the tax intake. A few years ago the PSA did not exist.

ZeroSum

aaj123 said:

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. 

I don't think this forum is representative of the wider population.

xylophone

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.

Boot's on the other foot - unfortunate pensioner having to chase HMRC for  repayment of tax deducted when no tax owed.

See

https://forums.moneysavingexpert.com/discussion/comment/79585658/#Comment_79585658

And HMRC have again deducted tax from her occupational pension although even after the application of the increase  to SP in April  and even after the increase on her occupational pension is applied in August, she will still not have enough taxable income Pension plus interest) to be liable for tax.

She is resigned to another weary wait on the telephone to persuade HMRC to do the job properly. 

DietIrnBru

The rationale is there for the PSA being restored to £1000 for higher rate tax payers, it is bureaucratically inefficient. I’d like to see it restored to £1000 as it would comfortably remove any need for me to have a cash isa with inferior rates. I earn around 45000. 

The tax free regime in UK is excessive as it is for the average Joe. £20000 for an ISA; £4000 for a LISA (additional tax relief); pension tax relief; dividend tax relief of £2000; PB’s. Only a very high net worth individual could ever hope to utilise all of it in a given year. The resolution foundation said as much in January 2023. Guess the only other tax dodger is the PM’s other half with the non Dom status. 

DietIrnBru

aaj123 said:

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. 

I do chuckle at contributors when they label their posts with “I’ve £200,000 where should I put it?”. It’s a nice problem to have.