Reeves' ISA review

Money_Grabber13579

SnowMan said:

poseidon1 said:

masonic said:

So about 75% of ISA subscribers will not be impacted as they don't use more allowance than that ordinarily. Seems well worth the political heat.

Interesting article below from A J Bell which backs up your statement. Particularly interesting how the total value in stocks and shares isas completely dwarfs that of cash isas by a magnitude of 7 times.

https://www.ajbell.co.uk/group/news/isas-unpacked-who-holds-them-and-how-much-do-they-have#:~:text=Around 1.8 million use up their full,60% contributing less than £5,000 a year

Obviously a large chunk of the population cannot afford to get anywhere  near the maximum £20k annual contribution, so our little echo chamber of forumites in no way reflects the wider saving public.

I fear for that reason, other than the inevitable backlash from the Tory press, reducing cash isas to £10k annually will still be a generous limit for the vast majority. 

Personally as long as the £20k overall  annual limit is retained, I won't be bothered either way.

The data is all at the link below although it's only available up to the 2021/2022 tax year

https://www.gov.uk/government/statistics/annual-savings-statistics-2024#full-publication-update-history

Of the 22 million UK residents who had an ISA (cash or stocks and shares) at all (so many don't even have one and so aren't represented in the chart below at all) the percentages contributing over 10K pa is only 14% (of which 8% contribute the full 20K)

I suspect that data might not be representative of the current scenario though. I pay £20k into an ISA each year now but I didn’t pay in anything in 21/22. That was by choice because interest rates were so low that I was never going to pay tax on the interest anyway and non isa rates were better than isa rates.

With hindsight, that wasn’t perhaps the most sensible decision but it seemed right at the time as I never expected interest rates to go up so quickly and so soon afterwards.

ivormonee

Given where interest rates are now, the cash ISA allowance goes some way in mitigating the tax increases resulting from from the ongoing freeze of the personal allowance. It's difficult to avoid the noise in today's media that report a further extension of the freeze is on the cards, further increasing our taxes. However, everything keeps changing every two minutes, and even after budget day there are likely to be u-turns on ninety per cent of the budget announcements anyway!

Albermarle

Alpine_Star said:

From today's FT Online.

The last paragraph is interesting. It is always said it is best not to trade/tinker with your investments too much .

Altior

Alpine_Star said:

From today's FT Online.

At least the article contextualises the data, using inflation and QE. Explaining that their 'fortune' is predominately down to asset inflation and time in the market. Since they probably haven't realised much of the capital gain, the ISA element is largely irrelevant. Though obviously, if there is a 'tax free' option, it makes sense to use it.

slinger2

The government is likely to get some money back eventually from the ISA millionaires in the form of IHT. Basic allowance of £325k unchanged since 2009 with a freeze currently planned until at least 2030.

If you're 72 and have over a million pounds sitting in your ISAs it's difficult to imagine how all that could be spent.

Farway

slinger2 said:

The government is likely to get some money back eventually from the ISA millionaires in the form of IHT. Basic allowance of £325k unchanged since 2009 with a freeze currently planned until at least 2030.

If you're 72 and have over a million pounds sitting in your ISAs it's difficult to imagine how all that could be spent.

You could follow George Best's example, wine, women & song, and then squander the rest 

Ocelot

That's probably about six months' care home fees.

SickGroove

So what are we thinking for pure cash ISAs?

Reduced to 15K or 12K effective the next tax year?

Albermarle

SickGroove said:

So what are we thinking for pure cash ISAs?

Reduced to 15K or 12K effective the next tax year?

If I put my political thinking cap on, I would not be surprised to find it does not feature in the budget at all, or at least only in some highly modified form.

It would stir up resentment. and headlines like 'Reeves robs pensioners of more savings taxes' 
It would only encourage a small minority to start investing in a S&S ISA, who had not done so before.
A lot of those investments would be outside the UK.
If the markets bombed out, the Mail/Telegraph/Express would be full of 'Pensioner loses life savings due to Reeves' headlines. 


So if I was the Chancellor, I would kick the whole idea into touch .

slinger2

SickGroove said:

So what are we thinking for pure cash ISAs?

Reduced to 15K or 12K effective the next tax year?

The problem they've got is that if they reduce the annual allowance for just Cash ISAs then they'll have to stop transfers from S&S ISAs to Cash ISAs. And if they announce it to start next April then they'll be encouraging transfers of S&S ISAs to Cash ISAs for the rest of this tax year if that's going to be your last chance to do such a thing. They'll probably also want to stop people investing in cash-like investments within a S&S ISA. All sounds pretty complicated to me. Simpler just to cut the annual ISA allowance to £10k or whatever.