Potential threat to annual £20k ISA limit?

jimjames

The existing allowance does seem very generous. To be able to build up an unlimited pot of money that is totally tax free to get any income from it a massive tax benefit for quite a few people. If you've invested well and have over a million in ISAs then you could take £40,000 per year income with no tax due at all.

LHW99

I would not be so complacent of them leaving things well alone in such circumstances.

Unfortunately the idea that any Government would "leave things alone", particularly ones that are of benefit to a reasonable proportion of the population, is probably a non-starter.

surreysaver

The existence of the Personal Savings Allowance means ISAs are pointless for those without much savings 

jimjames

surreysaver said:

The existence of the Personal Savings Allowance means ISAs are pointless for those without much savings 

You're assuming an ISA is only cash. For S&S ISAs they are always worthwhile as they protect from tax long term but also remove the need to keep records of purchase & sale prices.

Alistair31

jimjames said:

The existing allowance does seem very generous. To be able to build up an unlimited pot of money that is totally tax free to get any income from it a massive tax benefit for quite a few people. If you've invested well and have over a million in ISAs then you could take £40,000 per year income with no tax due at all.

Isn’t it just the growth amount that is truly tax-free? Most likely the money you’re putting in has already been subject to tax.

surreysaver

jimjames said:

surreysaver said:

The existence of the Personal Savings Allowance means ISAs are pointless for those without much savings 

You're assuming an ISA is only cash. For S&S ISAs they are always worthwhile as they protect from tax long term but also remove the need to keep records of purchase & sale prices.

Those without much cash savings are unlikely to be dabbling in S&S

EthicsGradient

Alistair31 said:

jimjames said:

The existing allowance does seem very generous. To be able to build up an unlimited pot of money that is totally tax free to get any income from it a massive tax benefit for quite a few people. If you've invested well and have over a million in ISAs then you could take £40,000 per year income with no tax due at all.

Isn’t it just the growth amount that is truly tax-free? Most likely the money you’re putting in has already been subject to tax.

To build up a million in an ISA, most of it has to have been from growth. I reckon the total that you could have put into PEPs of all kinds, TESSAs that were then converted and ISAs has been about £400,000. Assuming a few things about transferring the cash element (when TESSAs and PEPs became ISAs, at first only part could go into shares; there were rules about converting a cash ISA and S&S one, and I can't remember when those took effect), and a 7% annual total return for the share element, that could get you to over £1.3 million now.

And money going in has not always been taxed - gains on a primary residence, inheritances ...

london21

"In 2020-21, only 7 per cent of ISA holders (1.6 million people) maxed out their annual ISA allowance" I am not surprised. Depends on people's income and priorities.

Reading this has encouraged me to continue to put money away in my Funds ISA. 

The younger generation have it harder,  even the pension age is increasing also. 

Albermarle

I suspect there are an appreciable number of 'Boomer' forum contributors who have indeed been maximising ISA contributions annually and not relying on inheritances and redundancy payouts to do so.

I suspect like many other forum contributors with a decent salary, we were too busy maxing our 40% tax friendly pension contributions, to worry too much about also putting £20K pa into ISA's .

Linton

Albermarle said:

I suspect there are an appreciable number of 'Boomer' forum contributors who have indeed been maximising ISA contributions annually and not relying on inheritances and redundancy payouts to do so.

I suspect like many other forum contributors with a decent salary, we were too busy maxing our 40% tax friendly pension contributions, to worry too much about also putting £20K pa into ISA's .

One can of course do both.

Although I have benefitted considerably from the £20K allowance I cannot see allowing people like me a permanent tax free income of £10K+ can possibly be seen as justifiable as a matter of public policy.

Relatively poor or middle income people should be ecouraged to save for the future but the current level of permitted contributions goes way beyond an "encouragement".  It is purely a tax avoidance gift for the more wealthy.