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

boingy

The funny thing about all this is that it seems to have come from city types pressurising the chancellor and persuading her that it will encourage more share investment and save the economy. In other words, it's come form an lobby group who stand to gain from such a change. Hands up if you think it will have any measurable effect on the economy.

intalex

The choice that would remain will be taxed savings vs tax-shielded investments, and if interest rates drop rapidly as expected, then maybe some folks may opt for the latter...

kimwp

My plan/understanding is that when approaching retirement and subsequently reliance on accumulated funds, it's best to have 2-5 years cash to buffer over drops in the market. So I had a plan to convert this amount to cash ISAs as I got close to retirement. If the cash ISA limit is reduced, I'll have to start building the cash ISA up earlier, putting less into stocks and shares!

VNX

Riskman said:

If it is a straightforward limit on new money going into an ISA that's fine.  

The way it reads at the moment is as though Reeves doesn't want anyone to have more than £4k in a cash ISA which is unworkable therefore a worry.

It really isn’t a worry. Can you imagine the government trying to reduce everyone’s cash isa balances down to 4k?

totally unworkable and impossible. Any reduction to 4k will be from a date in the future with previous savings in ISAs left alone 

friolento

VNX said:

Riskman said:

If it is a straightforward limit on new money going into an ISA that's fine.  

The way it reads at the moment is as though Reeves doesn't want anyone to have more than £4k in a cash ISA which is unworkable therefore a worry.

It really isn’t a worry. Can you imagine the government trying to reduce everyone’s cash isa balances down to 4k?

totally unworkable and impossible. Any reduction to 4k will be from a date in the future with previous savings in ISAs left alone 

They could easily make a new rule that interest on balances above £xxx,xxx is no longer tax free in future. Would be an admin nightmare and extra cost for HMRC but could be “sold” as additional income of several billions a year for the Treasury. This could even be popular because it taxes “the rich”. 😱

intalex

friolento said:

They could easily make a new rule that interest on balances above £xxx,xxx is no longer tax free in future. Would be an admin nightmare and extra cost for HMRC but could be “sold” as additional income of several billions a year for the Treasury. This could even be popular because it taxes “the rich”. 😱

Easier to cap the tax-free interest than to cap the principal, as it would simply involve banks starting to report the ISA interest, issuing tax certificates, and asking savers to track and report their ISA interest as they currently do for non-ISA interest, and simply impose the cap (as another 0% rate band / allowance) in self-assessment / standalone tax liability calculations...

Shylock_249

Recharger said:

I hope Martin pursues this as much as possible with his normal vigour. On one hand governments want us to save for the future and have provided ISA's as a way of making some savings tax free. Now it appears that this government is going to make yet another big error and alienate even more people. Stocks and Shares ISA's are very useful for longer term gains, for those prepared to take a moderate element of risk and are to be recommended. For those who are risk averse and particularly those senior citizens (who don't have the luxury of the longer term savings) cash ISA's are a safe haven for some tax free gain. They should be looking at increasing, not decreasing the maximum allowed.
Given their mistakes on the low level of entitlement to the winter fuel allowance, possible changes to PIP and other disabled benefits, plus dragging pensioners into more and higher rate tax, lets hope they get a wake up call in the local elections and do not continue targeting those on lower and moderate incomes (which seems totally at odds with their ethics).
Any thoughts welcome!

One possible solution might be to allow the current 20k ISA rate to those at and above retirement age? 

In the last fy the wife and I converted our S&S ISAs into cash ISAs which we'd held for a number of years. At the age of 77 I'm certainly NOT going to start new S&S ISAs.  Fortunately we've always been able to take out cash ISAs of 20k each within the first few days of each financial year.  If the cash element is only 4k I certainly won't put 16k in S&S meaning that I'll be taxed on the interest for the 16k, so as I see it it's a win win for the government. 

VNX

friolento said:

VNX said:

Riskman said:

If it is a straightforward limit on new money going into an ISA that's fine.  

The way it reads at the moment is as though Reeves doesn't want anyone to have more than £4k in a cash ISA which is unworkable therefore a worry.

It really isn’t a worry. Can you imagine the government trying to reduce everyone’s cash isa balances down to 4k?

totally unworkable and impossible. Any reduction to 4k will be from a date in the future with previous savings in ISAs left alone 

They could easily make a new rule that interest on balances above £xxx,xxx is no longer tax free in future. Would be an admin nightmare and extra cost for HMRC but could be “sold” as additional income of several billions a year for the Treasury. This could even be popular because it taxes “the rich”. 😱

I could get run over by a bus today, an asteroid might end life as we know it next Tuesday.

dont worry about what you can’t control. 

VNX

Shylock_249 said:

Recharger said:

I hope Martin pursues this as much as possible with his normal vigour. On one hand governments want us to save for the future and have provided ISA's as a way of making some savings tax free. Now it appears that this government is going to make yet another big error and alienate even more people. Stocks and Shares ISA's are very useful for longer term gains, for those prepared to take a moderate element of risk and are to be recommended. For those who are risk averse and particularly those senior citizens (who don't have the luxury of the longer term savings) cash ISA's are a safe haven for some tax free gain. They should be looking at increasing, not decreasing the maximum allowed.
Given their mistakes on the low level of entitlement to the winter fuel allowance, possible changes to PIP and other disabled benefits, plus dragging pensioners into more and higher rate tax, lets hope they get a wake up call in the local elections and do not continue targeting those on lower and moderate incomes (which seems totally at odds with their ethics).
Any thoughts welcome!

One possible solution might be to allow the current 20k ISA rate to those at and above retirement age? 

In the last fy the wife and I converted our S&S ISAs into cash ISAs which we'd held for a number of years. At the age of 77 I'm certainly NOT going to start new S&S ISAs.  Fortunately we've always been able to take out cash ISAs of 20k each within the first few days of each financial year.  If the cash element is only 4k I certainly won't put 16k in S&S meaning that I'll be taxed on the interest for the 16k, so as I see it it's a win win for the government. 

Like the opposite of a LISA, I like the idea 

MeteredOut

intalex said:

friolento said:

They could easily make a new rule that interest on balances above £xxx,xxx is no longer tax free in future. Would be an admin nightmare and extra cost for HMRC but could be “sold” as additional income of several billions a year for the Treasury. This could even be popular because it taxes “the rich”. 😱

Easier to cap the tax-free interest than to cap the principal, as it would simply involve banks starting to report the ISA interest, issuing tax certificates, and asking savers to track and report their ISA interest as they currently do for non-ISA interest, and simply impose the cap (as another 0% rate band / allowance) in self-assessment / standalone tax liability calculations...

Asking the banks to make changes is never simple. Even if this change was announced in October, many legacy banks would struggle to have their systems changed by the start of the 25/26 tax year.

This thread is starting to remind me off all the pensions clickbait articles that caused some people to cash in and then regret it.

If its anything other than restricting new ISA money to £xK, i'll be very surprised.