Reeves' ISA review

clairec666

Albermarle said:

clairec666 said:

Growingold said:

clairec666 said:

Ocelot said:

clairec666 said:

Kim_13 said:

Ruling out cutting the overall £20,000 limit was a silly thing to do, and cutting it anyway would be no big deal - it wasn’t a manifesto commitment to my knowledge. A £20,000 ISA allowance against a £12,570 personal allowance is madness and cutting it would be better than restricting personal choice - and raise more revenue in the process.

If you're putting £20000 into an ISA each year then you're hardly struggling for money, yet by keeping the personal allowance frozen those at the lower end of the pay scale are losing a higher proportion of their income to tax. If Labour stuck to their original ethos, they would be slashing that ISA limit and raising the personal allowance in order to help out lower paid workers. There would be grumbles, but they'd soon go away. It's not as if they're raiding our existing ISAs and taxing us on their contents, they would just be limiting how much we put in. £5000 seems reasonable in my opinion.

I don 't know about you, but my 20k per year isn't 'new' money, it's money recycled from  taxable accounts.

It's still more money than a lot of people have though. I'm not knocking anyone who is working hard and managing to save some of their earnings, but I don't see why people should be able to build up massive ISA pots while those struggling to get by with little savings are paying more and more tax on their earnings. Still, political debate is to be avoided on this forum, so I'll say no more.

Okay some people are really struggling and I really do sympathise with them.  However a lot of people squander their money they could save for a rainy day on frivolous things.  The average household has numerous subscriptions for various things, are these really essential?  A lot of people must have the latest trend.  
And before anyone jumps on me for saying these things I cannot afford to save £20,000 a year in ISA's but I don't resent people who can.  I don't waste my money on unnecessary subscriptions or the latest fad in clothes or electronics.  I save what I can and when I want to treat myself I can.  I know from personal experience what it is like to watch every penny coming in.  Luckily I'm not in that situation now 
If people want to build up massive ISA pots then let them, they've earnt their money and they're free to choose what they spend it on, whether the here and now or the future.
Raising the personal allowance ( I wish they would) would not just benefit the lower earners though everyone would benefit.

I don't disagree with your point here. I do slightly resent people who squander money when they could be saving - I'm struggling to find work at the moment, but am not entitled to universal credit because I have managed to save, despite always being on a low wage.

My point about ISAs is that £20000 per year is rather generous. Yes, let people be able to benefit from their savings, but I think £10000 or even £5000 should suffice.

It is also interesting to see this in an international context.
The various ways you can earn savings interest tax free n the UK ( Cash ISA, Personal savings allowance, starter rate for savings) is very generous by International standards.
An Irish or German person would see being able to shelter even £5K pa from tax on interest as a godsend, never mind £20K +

That's interesting to know - I know very little about how savings and taxes work in other countries.

Savers in the UK have benefitted from favourable terms ever since the ISA limit hit £20000, and while nobody likes having something good taken away from them, they are failing to see the wider picture.

Kim_13

Albermarle said:

clairec666 said:

Growingold said:

clairec666 said:

Ocelot said:

clairec666 said:

Kim_13 said:

Ruling out cutting the overall £20,000 limit was a silly thing to do, and cutting it anyway would be no big deal - it wasn’t a manifesto commitment to my knowledge. A £20,000 ISA allowance against a £12,570 personal allowance is madness and cutting it would be better than restricting personal choice - and raise more revenue in the process.

If you're putting £20000 into an ISA each year then you're hardly struggling for money, yet by keeping the personal allowance frozen those at the lower end of the pay scale are losing a higher proportion of their income to tax. If Labour stuck to their original ethos, they would be slashing that ISA limit and raising the personal allowance in order to help out lower paid workers. There would be grumbles, but they'd soon go away. It's not as if they're raiding our existing ISAs and taxing us on their contents, they would just be limiting how much we put in. £5000 seems reasonable in my opinion.

I don 't know about you, but my 20k per year isn't 'new' money, it's money recycled from  taxable accounts.

It's still more money than a lot of people have though. I'm not knocking anyone who is working hard and managing to save some of their earnings, but I don't see why people should be able to build up massive ISA pots while those struggling to get by with little savings are paying more and more tax on their earnings. Still, political debate is to be avoided on this forum, so I'll say no more.

Okay some people are really struggling and I really do sympathise with them.  However a lot of people squander their money they could save for a rainy day on frivolous things.  The average household has numerous subscriptions for various things, are these really essential?  A lot of people must have the latest trend.  
And before anyone jumps on me for saying these things I cannot afford to save £20,000 a year in ISA's but I don't resent people who can.  I don't waste my money on unnecessary subscriptions or the latest fad in clothes or electronics.  I save what I can and when I want to treat myself I can.  I know from personal experience what it is like to watch every penny coming in.  Luckily I'm not in that situation now 
If people want to build up massive ISA pots then let them, they've earnt their money and they're free to choose what they spend it on, whether the here and now or the future.
Raising the personal allowance ( I wish they would) would not just benefit the lower earners though everyone would benefit.

I don't disagree with your point here. I do slightly resent people who squander money when they could be saving - I'm struggling to find work at the moment, but am not entitled to universal credit because I have managed to save, despite always being on a low wage.

My point about ISAs is that £20000 per year is rather generous. Yes, let people be able to benefit from their savings, but I think £10000 or even £5000 should suffice.

It is also interesting to see this in an international context.
The various ways you can earn savings interest tax free n the UK ( Cash ISA, Personal savings allowance, starter rate for savings) is very generous by International standards.
An Irish or German person would see being able to shelter even £5K pa from tax on interest as a godsend, never mind £20K +

Other countries have lower VAT rates and/or cheaper essential services (transport and fuel), so it could be argued to be swings and roundabouts. It’s better as a saver here, but not as a consumer.

clairec666

Shylock_249 said:

clairec666 said:

My point about ISAs is that £20000 per year is rather generous. Yes, let people be able to benefit from their savings, but I think £10000 or even £5000 should suffice.

I think there are plenty of people out there who think that interest on savings shouldn't be taxed in the first place; when one considers the money saved has, in most cases, been taxed previously as income tax.

But you are not being taxed 20% (or whatever your rate is) on your savings, which you may have already paid income tax on, as you say. You are being taxed on the interest on the savings, which is extra income that hasn't already been taxed. That's the way I see it, anyway.

I.e. you are not being unfairly double-taxed on your earnings.

It is difficult, especially if you're a higher rate tax payer, to see your savings diminish in value if your interest minus tax fails to keep up with inflation. But we've lived through recent times when interest rates were FAR below inflation for some time, and my own savings were eroded in real terms; I'm far more cross about that than any tax I might have to pay in the next few years.

Shylock_249

clairec666 said:

Shylock_249 said:

clairec666 said:

My point about ISAs is that £20000 per year is rather generous. Yes, let people be able to benefit from their savings, but I think £10000 or even £5000 should suffice.

I think there are plenty of people out there who think that interest on savings shouldn't be taxed in the first place; when one considers the money saved has, in most cases, been taxed previously as income tax.

But you are not being taxed 20% (or whatever your rate is) on your savings, which you may have already paid income tax on, as you say. You are being taxed on the interest on the savings, which is extra income that hasn't already been taxed. That's the way I see it, anyway.

I.e. you are not being unfairly double-taxed on your earnings.

I didn't say I was being taxed on my savings, I clearly said Interest on savings

clairec666

Shylock_249 said:

clairec666 said:

Shylock_249 said:

clairec666 said:

My point about ISAs is that £20000 per year is rather generous. Yes, let people be able to benefit from their savings, but I think £10000 or even £5000 should suffice.

I think there are plenty of people out there who think that interest on savings shouldn't be taxed in the first place; when one considers the money saved has, in most cases, been taxed previously as income tax.

But you are not being taxed 20% (or whatever your rate is) on your savings, which you may have already paid income tax on, as you say. You are being taxed on the interest on the savings, which is extra income that hasn't already been taxed. That's the way I see it, anyway.

I.e. you are not being unfairly double-taxed on your earnings.

I didn't say I was being taxed on my savings, I clearly said Interest on savings

Yes, but my point was that the interest has not been taxed, and why shouldn't it, just because the original income was taxed?

Shylock_249

clairec666 said:

Shylock_249 said:

clairec666 said:

Shylock_249 said:

clairec666 said:

My point about ISAs is that £20000 per year is rather generous. Yes, let people be able to benefit from their savings, but I think £10000 or even £5000 should suffice.

I think there are plenty of people out there who think that interest on savings shouldn't be taxed in the first place; when one considers the money saved has, in most cases, been taxed previously as income tax.

But you are not being taxed 20% (or whatever your rate is) on your savings, which you may have already paid income tax on, as you say. You are being taxed on the interest on the savings, which is extra income that hasn't already been taxed. That's the way I see it, anyway.

I.e. you are not being unfairly double-taxed on your earnings.

I didn't say I was being taxed on my savings, I clearly said Interest on savings

Yes, but my point was that the interest has not been taxed, and why shouldn't it, just because the original income was taxed?

clairec666 said:

Shylock_249 said:

clairec666 said:

Shylock_249 said:

clairec666 said:

My point about ISAs is that £20000 per year is rather generous. Yes, let people be able to benefit from their savings, but I think £10000 or even £5000 should suffice.

I think there are plenty of people out there who think that interest on savings shouldn't be taxed in the first place; when one considers the money saved has, in most cases, been taxed previously as income tax.

But you are not being taxed 20% (or whatever your rate is) on your savings, which you may have already paid income tax on, as you say. You are being taxed on the interest on the savings, which is extra income that hasn't already been taxed. That's the way I see it, anyway.

I.e. you are not being unfairly double-taxed on your earnings.

I didn't say I was being taxed on my savings, I clearly said Interest on savings

Yes, but my point was that the interest has not been taxed, and why shouldn't it, just because the original income was taxed?

That might be your point but it isn't what you wrote 😊  By all means quote me but please quote what I've written, NOT the opposite.

"Why shouldn't it, just because the original income was taxed?" - Yes!  And as I posted originally I think there are a lot of people out there who think the same.  I'd suggest there are more savers out there who think the interest on their savings shouldn't be taxed as apposed to those who think it should. 

Alexland

clairec666 said:

Yes, but my point was that the interest has not been taxed, and why shouldn't it, just because the original income was taxed?

Over the long term the interest on cash savings is only around enough to keep pace with inflation (sometimes more, sometimes less) so the ISA holder is not making a gain they are just choosing to use their spending power later unless the facility to spend later is somehow considered a gain even if it buys the same amount of stuff.

On this understanding it seems unfair that savers who have savings outside of ISA wrappers are taxed as it causes their spending power to erode over time.

I do think there's an argument that S&S ISA investors (including myself) who make above inflation gains on their assets might have made a real gain however that would be quite hard to tax fairly given the long measurement periods required to form a proper opinion and the current CGT system for gains on disposal of unwrapped assets is far from ideal.

Maybe the whole system of ISAs should be dismantled and people should only be taxed on real (above inflation) gains?

clairec666

Shylock_249 said:

clairec666 said:

Shylock_249 said:

clairec666 said:

Shylock_249 said:

clairec666 said:

My point about ISAs is that £20000 per year is rather generous. Yes, let people be able to benefit from their savings, but I think £10000 or even £5000 should suffice.

I think there are plenty of people out there who think that interest on savings shouldn't be taxed in the first place; when one considers the money saved has, in most cases, been taxed previously as income tax.

But you are not being taxed 20% (or whatever your rate is) on your savings, which you may have already paid income tax on, as you say. You are being taxed on the interest on the savings, which is extra income that hasn't already been taxed. That's the way I see it, anyway.

I.e. you are not being unfairly double-taxed on your earnings.

I didn't say I was being taxed on my savings, I clearly said Interest on savings

Yes, but my point was that the interest has not been taxed, and why shouldn't it, just because the original income was taxed?

clairec666 said:

Shylock_249 said:

clairec666 said:

Shylock_249 said:

clairec666 said:

My point about ISAs is that £20000 per year is rather generous. Yes, let people be able to benefit from their savings, but I think £10000 or even £5000 should suffice.

I think there are plenty of people out there who think that interest on savings shouldn't be taxed in the first place; when one considers the money saved has, in most cases, been taxed previously as income tax.

But you are not being taxed 20% (or whatever your rate is) on your savings, which you may have already paid income tax on, as you say. You are being taxed on the interest on the savings, which is extra income that hasn't already been taxed. That's the way I see it, anyway.

I.e. you are not being unfairly double-taxed on your earnings.

I didn't say I was being taxed on my savings, I clearly said Interest on savings

Yes, but my point was that the interest has not been taxed, and why shouldn't it, just because the original income was taxed?

That might be your point but it isn't what you wrote 😊  By all means quote me but please quote what I've written, NOT the opposite.

"Why shouldn't it, just because the original income was taxed?" - Yes!  And as I posted originally I think there are a lot of people out there who think the same.  I'd suggest there are more savers out there who think the interest on their savings shouldn't be taxed as apposed to those who think it should. 

I didn't misquote you at all, I was making a point connected to what you wrote.

clairec666

Alexland said:

clairec666 said:

Yes, but my point was that the interest has not been taxed, and why shouldn't it, just because the original income was taxed?

Over the long term the interest on cash savings is only around enough to keep pace with inflation (sometimes more, sometimes less) so the ISA holder is not making a gain they are just choosing to use their spending power later unless the facility to spend later is somehow considered a gain even if it buys the same amount of stuff.

On this understanding it seems unfair that savers who have savings outside of ISA wrappers are taxed as it causes their spending power to erode over time.

I do think there's an argument that S&S ISA investors (including myself) who make above inflation gains on their assets might have made a real gain however that would be quite hard to tax fairly given the long measurement periods required to form a proper opinion and the current CGT system for gains on disposal of unwrapped assets is far from ideal.

Maybe the whole system of ISAs should be dismantled and people should only be taxed on real (above inflation) gains?

Theoretically I like the idea, but don't know how easy it would be to implement. Probably will never happen. Interesting talking point though.

Alpine_Star

clairec666 said:

Growingold said:

clairec666 said:

Ocelot said:

clairec666 said:

Kim_13 said:

Ruling out cutting the overall £20,000 limit was a silly thing to do, and cutting it anyway would be no big deal - it wasn’t a manifesto commitment to my knowledge. A £20,000 ISA allowance against a £12,570 personal allowance is madness and cutting it would be better than restricting personal choice - and raise more revenue in the process.

If you're putting £20000 into an ISA each year then you're hardly struggling for money, yet by keeping the personal allowance frozen those at the lower end of the pay scale are losing a higher proportion of their income to tax. If Labour stuck to their original ethos, they would be slashing that ISA limit and raising the personal allowance in order to help out lower paid workers. There would be grumbles, but they'd soon go away. It's not as if they're raiding our existing ISAs and taxing us on their contents, they would just be limiting how much we put in. £5000 seems reasonable in my opinion.

I don 't know about you, but my 20k per year isn't 'new' money, it's money recycled from  taxable accounts.

It's still more money than a lot of people have though. I'm not knocking anyone who is working hard and managing to save some of their earnings, but I don't see why people should be able to build up massive ISA pots while those struggling to get by with little savings are paying more and more tax on their earnings. Still, political debate is to be avoided on this forum, so I'll say no more.

Okay some people are really struggling and I really do sympathise with them.  However a lot of people squander their money they could save for a rainy day on frivolous things.  The average household has numerous subscriptions for various things, are these really essential?  A lot of people must have the latest trend.  
And before anyone jumps on me for saying these things I cannot afford to save £20,000 a year in ISA's but I don't resent people who can.  I don't waste my money on unnecessary subscriptions or the latest fad in clothes or electronics.  I save what I can and when I want to treat myself I can.  I know from personal experience what it is like to watch every penny coming in.  Luckily I'm not in that situation now 
If people want to build up massive ISA pots then let them, they've earnt their money and they're free to choose what they spend it on, whether the here and now or the future.
Raising the personal allowance ( I wish they would) would not just benefit the lower earners though everyone would benefit.

I don't disagree with your point here. I do slightly resent people who squander money when they could be saving - I'm struggling to find work at the moment, but am not entitled to universal credit because I have managed to save, despite always being on a low wage.

My point about ISAs is that £20000 per year is rather generous. Yes, let people be able to benefit from their savings, but I think £10000 or even £5000 should suffice.

The £20k allowance isn't just for those who earn a lot and want to save regularly, but also those who occasionally benefit from a lump sum such as an inheritance or sale of a capital asset and want to keep it as a nest egg, which I suspect makes up a large proportion of cash ISAs.