Reeves' ISA review

Rheumatoid

Darnhall123 said:

The_Green_Hornet said:

Over 65s to keep full 20k cash allowance.

And the change from £20k to £12k into a cash ISA doesn’t kick in till April 2027. Result. 

One advantage to turning 65 next October I suppose

clairec666

I don't like that increase to tax on savings income. Simply because the numbers aren't as nice to work with. Currently to decide whether I'm better off putting money into an ISA or non-ISA, I do a simple "multiply by 1.25" on my ISA rate. "Multiply by 1.28205..." just doesn't have the same ring to it.

SnowMan

https://assets.publishing.service.gov.uk/media/6926eb102a37784b16ecf525/E03444720_Budget_2025_Web_Accessible.pdf

4.228 ISA Reform – From 6 April 2027 the annual ISA cash limit will be set at £12,000, within the overall annual ISA limit of £20,000. Annual subscription limits will remain at £20,000 for ISAs, £4,000 for Lifetime ISAs and £9,000 for Junior ISAs and Child Trust Funds until 5 April 2031. Savers over the age of 65 will continue to be able to save up to £20,000 in a cash ISA each year. In addition, financial services firms will be providing new, easily navigable ways for people to find the right UK investment for them.

4.230 Lifetime ISA Reform – The government will publish a consultation in early 2026 on the implementation of a new, simpler ISA product to support first time buyers to buy a home. Once available, this new product will be offered in place of the Lifetime ISA.

jimjames

eskbanker said:

Altior said:

Grumpy_chap said:

jimjames said:

With an ISA of £11 million

That's a bonus £10 million over and above the article about ISAs of £1 million.
Must be very very few people that achieved that.

The key element is that they would have achieved close to the same via a GIA. Not their stock picking prowess.

The ISA element only kicks in (for cap gains) when those gains are realised. Which, they probably haven't been, to achieve these numbers. 

ie, they are not ISA millionaires due to ISAs, but due to the way they invest. They are investment millionaires. There are lots of investment millionaires, and/or DB/DC pension millionaires. In fact, there are lots of property millionaires as well.

It's palpably disingenuously written in a way to make out that the only reason it has happened for them is a 'tax giveaway'.

Er, no. It's not. 

The most significant context, completely ignored it seems to me, is asset inflation over time. Including vast 'money printing' and the erosion of the value of fiat money over recent history. 

But someone building up an eight-figure investment pot in a GIA will have accumulated a massive CGT liability, even if it hasn't actually been incurred yet, so it seems valid to me to make the distinction that using the ISA tax shelter negates that and improves their net wealth.  You might choose to infer that it's attributing the size of the pot to using ISAs but that isn't actually stated....

Exactly and also can generate totally tax free income from that capital too. Again not possible outside an ISA where it might be taxed at as much as 45%

jak22 said:

It's a pointless and unnecessary change, and just complicates ISA even more  - many are already fairly confused by ISA rules and individual bank's T&Cs judging by posts 

Except it's exactly how ISAs were when originally introduced. The idea was never to have a full allowance available as cash.

fiddlesticks0

Given there's nearly a year and a half until this comes into effect, I wounder what the odds are on this proposal being scrapped before it happens. 

I take it the proposed change doesn't just refer to UK stocks - aren't they generally doing & forecast to continue doing badly, along with pretty much everything else in this country? I thought this was one proposal that was being talked about at some stage, but i could be wrong. Given I know so little about S&S and am risk averse, I highly doubt I'll be one of those people to be nudged into putting the remaining 8k allowance into these. Hopefully enough people will voice the same sentiment and we'll have another u-turn.

Update (from Reuters) 'Analysts, meanwhile, say hopes the money will be invested in Britain may be misplaced if savers instead choose better-performing overseas markets.'

eskbanker

clairec666 said:

I don't like that increase to tax on savings income. Simply because the numbers aren't as nice to work with. Currently to decide whether I'm better off putting money into an ISA or non-ISA, I do a simple "multiply by 1.25" on my ISA rate. "Multiply by 1.28205..." just doesn't have the same ring to it.

If that's the biggest of your issues with the announced changes then I think you can consider yourself lucky....  "Divide by 0.78" obviously isn't difficult if using calculators or spreadsheets, but if you're looking to conduct such analysis mentally then yes, a bit more challenging!

clairec666

eskbanker said:

clairec666 said:

I don't like that increase to tax on savings income. Simply because the numbers aren't as nice to work with. Currently to decide whether I'm better off putting money into an ISA or non-ISA, I do a simple "multiply by 1.25" on my ISA rate. "Multiply by 1.28205..." just doesn't have the same ring to it.

If that's the biggest of your issues with the announced changes then I think you can consider yourself lucky....  "Divide by 0.78" obviously isn't difficult if using calculators or spreadsheets, but if you're looking to conduct such analysis mentally then yes, a bit more challenging!

Well, I'm more bothered about fiscal drag, and the resultant increase in tax paid by the lowest-paid workers. But messing around with nice neat numbers does bother me a little. Just lightening the mood.

Albermarle

fiddlesticks0 said:

Given there's nearly a year and a half until this comes into effect, I wounder what the odds are on this proposal being scrapped before it happens. 

I take it the proposed change doesn't just refer to UK stocks - aren't they generally doing & forecast to continue doing badly, along with pretty much everything else in this country? I thought this was one proposal that was being talked about at some stage, but i could be wrong. Given I know so little about S&S and am risk averse, I highly doubt I'll be one of those people to be nudged into putting the remaining 8k allowance into these. Hopefully enough people will voice the same sentiment and we'll have another u-turn.

Update (from Reuters) 'Analysts, meanwhile, say hopes the money will be invested in Britain may be misplaced if savers instead choose better-performing overseas markets.'

I think the  'investing in Britain' part is only part of the logic. It is also  that long term investments normally grow a lot more than cash savings, so it is trying to nudge a reluctant nation into not being frightened of investing for their own good ( similar to the advice which is often doled out in these forums) .
The public is woefully uneducated on all personal finance matters and many have no idea how/why/what their pensions are invested in.
However there will be many people resistant to the idea ( like yourself ) and I guess most people who are comfortable with investing will already have done so anyway, so it might get scrapped in the end.

I take it the proposed change doesn't just refer to UK stocks - aren't they generally doing & forecast to continue doing badly, along with pretty much everything else in this country?

In the last few years UK stocks have generally underperformed the main US market, but have been doing rather well recently. The FTSE 100 is up 18.5% since January 1st . 

Media report of the stock market tends to sensationalise any drops and not mention any steady rises.

Albermarle

jak22 said:

It's a pointless and unnecessary change, and just complicates ISA even more  - many are already fairly confused by ISA rules and individual bank's T&Cs judging by posts 

It won't raise much revenue but just reduces choice - tax has already been paid on the contributions - the amount of tax lost by ISA interest being tax free is just a fraction of that already paid.

However by international standards, the UK tax regime for savings interest is still a very generous one.
An Irish or German person would be ecstatic to be able to put away £12K pa tax free ( + personal allowance) 

slinger2

For me, as a 20% tax pater who's over the tax-free £1k savings allowance, the 2% extra tax will work out as a cut of about 0.1% in the interest rate. 80% of 5% = 4%, 78% of 5% = 3.9%. Probably the anticipated 0.25% cut in the base rate next month will be a bigger effect.