Reeves' ISA review

clairec666

Honestly, none of us like tax, but we know it's necessary. We particularly dislike it when we get given the money then have to give a chunk of it back. I rarely hear anyone kick up much of a fuss about VAT, because it's not like we can "see" it disappearing, like with tax deductions on our payslips.

Money_Grabber13579

clairec666 said:

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.

Fairly easy, and it used to be a thing in the form of indexation, where the base cost got indexed up by reference to RPI. Of course, that got abolished to bring in more tax.

boingy

I just keep coming back to that thing where they are going to fiddle with loads of things with each raising a relatively small amount when we all know the absolute best way for a government to raise significant chunks of money is to raise income tax. Shame about that manifesto promise really. I think the current chancellor might well be forced to raise income tax then be fired as the scapegoat for breaking that promise!

And any changes made to ISAs, savings, pensions etc will only raise extra tax for a few years. After that we'll have adjusted our behaviour to minimise the tax liability again. 

Altior

They are raising income tax via 'fiscal drag'. Just via stealth, but it's not really stealthy now.

I agree that fiddling with ISAs will achieve practically nothing, and quite possibly be counterproductive when everything is considered, like many of the changes brought in last year. However raising tax revenue isn't the endemic issue. 

Alexland

clairec666 said:

Honestly, none of us like tax, but we know it's necessary.

boingy said:

we all know the absolute best way for a government to raise significant chunks of money is to raise income tax. Shame about that manifesto promise really. 

You both seem to be adopting the concept that this is a worthy endeavour to raise taxes which is necessary.

The problem is that public sector spending as a proportion of GDP has settled at higher levels since Covid.

It was around 40% of GDP in pre-Covid and is now around 45%.

That's the problem they need to address - spending the taxes wisely, smarter, less wastefully, etc while also selectively cutting taxes to jumpstart the economy.

At this rate the treasury will need to go beyond ISA reform and start taking coins from my kids piggy banks.

We need leadership that can persuade MPs, media and the general public that short term pain is worth it to achieve long term gain else we will just have severe long term pain.

The_Green_Hornet

If I was a betting person I would suspect that the Cash ISA Allowance will be capped at 50% (£10k) at the forthcoming budget which is effectively what it was before the rules were changed in 2014/15.

More than enough for most working people.

Ocelot

The_Green_Hornet said:

If I was a betting person I would suspect that the Cash ISA Allowance will be capped at 50% (£10k) at the forthcoming budget which is effectively what it was before the rules were changed in 2014/15.

More than enough for most working people.

But not for those who want to transfer an expiring fixed rate bond to an ISA.

ColdIron

The_Green_Hornet said:

If I was a betting person I would suspect that the Cash ISA Allowance will be capped at 50% (£10k) at the forthcoming budget which is effectively what it was before the rules were changed in 2014/15.

The cash ISA allowance in 2014/15 was £15,000 but only £5,760 the year before

The_Green_Hornet

Ocelot said:

The_Green_Hornet said:

If I was a betting person I would suspect that the Cash ISA Allowance will be capped at 50% (£10k) at the forthcoming budget which is effectively what it was before the rules were changed in 2014/15.

More than enough for most working people.

But not for those who want to transfer an expiring fixed rate bond to an ISA.

Most doesn't equal all.

clairec666

Ocelot said:

The_Green_Hornet said:

If I was a betting person I would suspect that the Cash ISA Allowance will be capped at 50% (£10k) at the forthcoming budget which is effectively what it was before the rules were changed in 2014/15.

More than enough for most working people.

But not for those who want to transfer an expiring fixed rate bond to an ISA.

If (and it's a big if) there are any changes to the ISA limit, there will inevitably be some people who get caught out.