Government aiming to make £605m in tax revenue purely from ISAs....

Sarahspangles

solidpro said:

I saw someone discussing the actual 2024 budget document, which says virtually nothing about ISAs, other than freezing the rules until 2030. And yet in the 'repairing the public finances' section, point 31, it shows £605m in tax revenue from 'savings - ISAs and CTFs', by 2030.

His interpretation was that this was by freezing the £20k annual limit until 2030, which was last increased in 2017, the 2017 £20k allowance is, by 2030 worth only about £14k, and that 'extra' 6k (in 2017 terms) would have to go elsewhere - unwrapped investments which incur more tax.

Is this a good assumption? Seems odd that if this was the case, they shows the revenued earned in 2024-26 as £0. Where else would this £605m in ISA and CTF 'tax revenue' come from?

If you’re interested in how the budget is developed, from a process point of view, the OBR publish a detailed description. https://obr.uk/forecasts-in-depth/forecast-methodology/

It’s broadly similar to the way smaller public sector organisations set budgets. 

The forecasts in tables like the ones being ‘screenshot’ are based on a starting point where previous funding decisions are simply rolled forward. In the case of this budget, unusually, there was a view that the previous budget never actually balanced, which is why OBR published additional information about the alleged ‘black hole’.

The leadership publish some assumptions, such as growth, and then set targets which normally require each department to achieve a net reduction in spend. The savings and spending are presented as + or - the ‘roll forward’ budget.

Occasionally an organisation will take a different approach called zero-based budgeting where each department has to justify its existence and go back to first principles on what it delivers in return for core funding.

LHW99

Occasionally an organisation will take a different approach called zero-based budgeting where each department has to justify its existence and go back to first principles on what it delivers in return for core funding.

Can't see the Treasury opting for that one, unfortunately.

SnowMan

https://obr.uk/docs/dlm_uploads/27814-BriefingPaperNo_6.pdf

So the saving is likely the saving though not increasing the ISA allowance by CPI vs increasing it with CPI? (see below)

Micklemuch

It would surely be politically difficult for them to just start taxing interest on money in ISAs? People (including me) have deposited funds for many years purely on the assumption that interest will remain tax free? I guess all will become clear.

eskbanker

Micklemuch said:

It would surely be politically difficult for them to just start taxing interest on money in ISAs? People (including me) have deposited funds for many years purely on the assumption that interest will remain tax free? I guess all will become clear.

To the best of my knowledge, there is no such proposal to start taxing interest on money in ISAs?

This thread from several months ago is effectively about how fiscal drag is reflected in the budget, and there are a couple of current threads regarding some investment firms wanting reform to tilt ISAs more towards investing than saving....