Reeves' ISA review

Alpine_Star

Rumblings in the Telegraph suggesting the allowance could halve.

Alpine_Star

''The Treasury argues its Isa change will benefit British savers with higher returns, British companies with an injection of cash and the UK economy by better financing for the private sector.''

I can only hope that it's only the Telegraph and not the Treasury that thinks more investing benefits ''savers''.

Sea_Shell

If this change is made, I don't think it's going to achieve what they want it to.    It will just annoy people, for no gain.

If people wanted to "invest", they'll have likely done it already, and if they just want to "save", then they will want to be in cash. 

You can't force a square peg into a round hole.   And neither should you try to.  

subjecttocontract

If the cash isa allowance is cut to say £10K then the Gov will gain anyway. Some will put the remaining allowance in a S&S isa and those that choose not to will pay tax on the interest. So, it's a win,win for the Gov'.......until election day when it might prove a bad move.

ivormonee

We don't save in a cash ISA - we save in a savings account from which the income is not subject to tax, and such a tax-free savings account is called a cash ISA.

Reducing the limit that can be saved in such an account means that the interest from some of that money that somebody wishes to save will be taxable.

If somebody wishes to invest, then they already have that option. Therefore, reducing the cash ISA allowance will do virtually nothing to increase people investing rather than saving. It will just reduce the amount of tax-free income they can achieve.

So, Reeve's aim of reducing the cash ISA allowance is not to encorage investing; it is to increase tax receipts for the government. 

clairec666

ivormonee said:

We don't save in a cash ISA - we save in a savings account from which the income is not subject to tax, and such a tax-free savings account is called a cash ISA.

Reducing the limit that can be saved in such an account means that the interest from some of that money that somebody wishes to save will be taxable.

If somebody wishes to invest, then they already have that option. Therefore, reducing the cash ISA allowance will do virtually nothing to increase people investing rather than saving. It will just reduce the amount of tax-free income they can achieve.

So, Reeve's aim of reducing the cash ISA allowance is not to encorage investing; it is to increase tax receipts for the government. 

That's what I suspected the intention was all along - I would prefer some honesty from Reeves et al, rather than trying to sell it as something that benefits us. I would not resent her for saying "look, we need to raise some more money from taxes, and one way of doing this is to slash the ISA limit", and I doubt many people would stop voting Labour just because of this one little thing.

SnowMan

Treasury Select Commitee report out today, where they say 'Government should not cut the Cash ISA allowance'

https://committees.parliament.uk/committee/158/treasury-committee/news/209846/government-should-not-cut-the-cash-isa-allowance/

clairec666

Shylock_249 said:

clairec666 said:

ivormonee said:

We don't save in a cash ISA - we save in a savings account from which the income is not subject to tax, and such a tax-free savings account is called a cash ISA.

Reducing the limit that can be saved in such an account means that the interest from some of that money that somebody wishes to save will be taxable.

If somebody wishes to invest, then they already have that option. Therefore, reducing the cash ISA allowance will do virtually nothing to increase people investing rather than saving. It will just reduce the amount of tax-free income they can achieve.

So, Reeve's aim of reducing the cash ISA allowance is not to encorage investing; it is to increase tax receipts for the government. 

That's what I suspected the intention was all along - I would prefer some honesty from Reeves et al, rather than trying to sell it as something that benefits us. I would not resent her for saying "look, we need to raise some more money from taxes, and one way of doing this is to slash the ISA limit", and I doubt many people would stop voting Labour just because of this one little thing.

Interesting points.

Your 1st point: Honest from Reeves... Start by asking her who bought her outfits.

Your 2nd point: and I doubt........  Well there will be people out there who will NOT only be affected by "this one little thing", people like myself and my wife who will indeed get the winter fuel allowance only to have it clawed back later by HMRC. What a system ,what an idea?

If one could save 10k in an ISA at current rates of about 4.5% the interest for one year would be £450. Without the ISA wrapper HMRC will, for lots of people, deduct £90 in tax.  Agreed it might be one little thing to me, my wife and possibly you, but £90 is NOT to be sniffed at by lots of people and I doubt it will be a vote winner.  Doing nothing is the best option IMO. 

Fair point, but what I meant was that people are likely to form opinions about Labour based on several policies, not just one. And in some cases then losing some of their ISA allowance may be the straw that breaks the camel's back and encourage them to vote elsewhere, but I can't imagine there are many people who would have happily voted Labour but changed their mind solely on the ISA allowance being cut.

And yes, £90 is not to be sniffed at, and I would be a bit miffed at paying an extra £90 in tax, but if someone is able to put away £10,000 a year in savings, they are more likely to be able to cope with the loss of £90 than someone with no savings at all.

SFCooper

clairec666 said:

Shylock_249 said:

clairec666 said:

ivormonee said:

We don't save in a cash ISA - we save in a savings account from which the income is not subject to tax, and such a tax-free savings account is called a cash ISA.

Reducing the limit that can be saved in such an account means that the interest from some of that money that somebody wishes to save will be taxable.

If somebody wishes to invest, then they already have that option. Therefore, reducing the cash ISA allowance will do virtually nothing to increase people investing rather than saving. It will just reduce the amount of tax-free income they can achieve.

So, Reeve's aim of reducing the cash ISA allowance is not to encorage investing; it is to increase tax receipts for the government. 

That's what I suspected the intention was all along - I would prefer some honesty from Reeves et al, rather than trying to sell it as something that benefits us. I would not resent her for saying "look, we need to raise some more money from taxes, and one way of doing this is to slash the ISA limit", and I doubt many people would stop voting Labour just because of this one little thing.

Interesting points.

Your 1st point: Honest from Reeves... Start by asking her who bought her outfits.

Your 2nd point: and I doubt........  Well there will be people out there who will NOT only be affected by "this one little thing", people like myself and my wife who will indeed get the winter fuel allowance only to have it clawed back later by HMRC. What a system ,what an idea?

If one could save 10k in an ISA at current rates of about 4.5% the interest for one year would be £450. Without the ISA wrapper HMRC will, for lots of people, deduct £90 in tax.  Agreed it might be one little thing to me, my wife and possibly you, but £90 is NOT to be sniffed at by lots of people and I doubt it will be a vote winner.  Doing nothing is the best option IMO. 

Fair point, but what I meant was that people are likely to form opinions about Labour based on several policies, not just one. And in some cases then losing some of their ISA allowance may be the straw that breaks the camel's back and encourage them to vote elsewhere, but I can't imagine there are many people who would have happily voted Labour but changed their mind solely on the ISA allowance being cut.

And yes, £90 is not to be sniffed at, and I would be a bit miffed at paying an extra £90 in tax, but if someone is able to put away £10,000 a year in savings, they are more likely to be able to cope with the loss of £90 than someone with no savings at all.

So I should be punished if I have the ability to save that amount?

ivormonee

clairec666 said:

I would prefer some honesty from Reeves et al, rather than trying to sell it as something that benefits us.

This is exactly my thinking aswell. Reeve's rhetoric of "we will reduce the cash ISA allowance so that you can have better returns on your money from investing it instead" holds no water at all. Behavioural changes (investing more by saving less) come from awareness and education, not by force through confiscation (taking away some of the cash ISA allowance)! If Reeve's moral compass was such that she embraced honesty, her rhetoric would be what you stated above: 

clairec666 said:

 "look, we need to raise some more money from taxes, and one way of doing this is to slash the ISA limit", 

Taking away some of the cash ISA does not convert a saver to an investor, as the attitudes and risk appetites are mutually exclusive.

Dishonesty is prevalent in the way budget decisons have been presented so far. The pledge of not increasing three of the main taxes for the next five years was an act of sheer stupidity and highly irresponsible. It cannot be responsible to make such a commitment without knowing what the future might hold. 

An honest pledge might have been: "we will aim to make fair decisions to balance tax and spending so that we maintain public services and a decent society" etc. The dishonesty transcends into nearly all the budget changes to date, and will not solely apply to the cash ISA wool-over-the-eyes rhetoric!