Martin Lewis: Is the £20,000 cash ISA limit about to be killed off?

MSE_Emily

Plans to cut the £20,000 cash ISA limit later this year are being considered by the Government. In his latest video, MoneySavingExpert.com founder Martin Lewis explains what's likely to happen, what the changes would mean for savers and what you should be doing now...

Read the full story:

Martin Lewis: Is the £20,000 cash ISA limit about to be killed off? What you need to know

If you haven't already, join the forum to reply.

eskbanker

TLDR:     

"But I really wanted to get this video out to say, don't panic about your existing cash ISAs, but understand there is a risk the allowance could be lowered later on this year... but nobody knows."

El_Torro

Hopefully if there are any changes they will be applicable from a future tax year, not this one.

Personally I am more interested in Stocks & Shares ISAs than Cash ones, nice to have options though.

Hoenir

El_Torro said:

Hopefully if there are any changes they will be applicable from a future tax year, not this one.

Be chaotic to introduce changes during the tax year...... definately will be next.  Tax revenue needs to be raised. 

x44

..and if anyone is thinking along the lines of - oh well if that happens I'll just stick the cash part in a S&S money market fund instead; then not so fast on your thinking!

Before ISA's were ISA's they were called PEP's and there was indeed a higher amount allowable in the S&S element than in the cash element.

Money market funds were going to be paying interest rather than dividends so precisely to stop such loopholes the rules at that time were that any interest payments gained from within the S&S element were FULLY taxable: I'm not sure if money market type fund were ever formerely banned from being kept within a S&S PEP but the effect was than none were ever used.  I even recall that if you sold a fund and then waited with the funds in your providers holding account before re-investing for any length of time you got a nasty letter from the provider.

This rule vanished when the annual S&S and cash components were equalised - probably around 2015.

So if HMG do decide to reduce the annual cash part of the ISA in the future I'd fully expect them to re-introduce the rule.

masonic

Even the first ISAs restricted the amount that could be held in the cash component, prohibited transfers from S&S to cash component, and excluded very low risk investments from ISA eligibility. Interest on cash in a S&S ISA was also taxed IIRC.

But...

 

auser99

masonic said:

Even the first ISAs restricted the amount that could be held in the cash component, prohibited transfers from S&S to cash component, and excluded very low risk investments from ISA eligibility. Interest on cash in a S&S ISA was also taxed IIRC.

But...

 

On say the example of a Halifax S&S, they have a scale of 1-5 for risk I believe.

So they would potentially block maybe tiers 1 & 2 from the allowance?  Which could actually potentially reduce the amount of existing users who already actually use the S&S ISA format?

intalex

What about gilts?

masonic

auser99 said:

masonic said:

Even the first ISAs restricted the amount that could be held in the cash component, prohibited transfers from S&S to cash component, and excluded very low risk investments from ISA eligibility. Interest on cash in a S&S ISA was also taxed IIRC.

But...

On say the example of a Halifax S&S, they have a scale of 1-5 for risk I believe.

So they would potentially block maybe tiers 1 & 2 from the allowance?  Which could actually potentially reduce the amount of existing users who already actually use the S&S ISA format?

intalex said:

What about gilts?

Medium to long duration bond funds were ok to hold. Money market and short dated government bond funds were not (or there were no examples of ISA eligible ones). Tier 2 would probably be ok. I don't think individual gilts were available to trade in investment platforms at that time, but I'd be very surprised if they'd be allowed - they already have favourable tax treatment if held outside an ISA anyway.

It may be that existing investments would be ok, but ISA managers would not be allowed to let investors buy more, if anything like this happens.

Middle_of_the_Road

Hoenir said:

El_Torro said:

Hopefully if there are any changes they will be applicable from a future tax year, not this one.

Be chaotic to introduce changes during the tax year...... definately will be next.  Tax revenue needs to be raised. 

If this change takes place, this board could well have a meltdown 🔥🧯

pecunianonolet

First the reporting structure and data sharing needs upgrading and that is being worked on. There is an ISA element in that consultation.

https://www.gov.uk/government/consultations/better-use-of-new-and-improved-third-party-data/better-use-of-new-and-improved-third-party-data-to-make-it-easier-to-pay-tax-right-first-time