Martin Lewis: Cash ISA limit could be cut – this is 'p*ss people off economics'

hallmark

On a separate topic, why is Rachel Reeves announcing major changes to ISAs at a banquet?  Whenever there is unwanted speculation on upcoming changes we are told the following:

"The Treasury said it does not comment on speculation on policy changes outside of fiscal events"

Last time I checked Fiscal Events were budgets, spring statements and possibly spending reviews. This is a slap-up meal for Bankers and Merchants.

Stubod

..they should just stop all ISA's and raise the basic tax threshold, and increase the current £1k savings allowance before tax to (say), £2k..??

RogerPensionGuy

Reference my previous mini cash ISAs post on here. 

Below is a link which shows how these investment/saving vehicles have morped over the years. 


Many commentators do say the more & more they change, twist, tweek these vehicles the more some people just tend to ignore them, a bit like pension changes to get my old drum out. 

Many people like easynesss, stability & suchlike. 

Premium Bonds do appear to work very well for Governments and I think they have been left pretty alone as it obviously suits governments. 

I still think with so much bad PR about currently the Cash ISA will be left alone for now, but maybe they will up other allowances to allow people to inflate the UK stockmarket as it suits views held, time will tell.

***

https://en.m.wikipedia.org/wiki/Individual_savings_account

friolento

RogerPensionGuy said:

This possible reduction in the mini cash ISA has been mooted about a lot for a long time like so much stuff they do, pensions instability and the near impossible way they make pension planning a game of luck is my personal buggbear. 

Although maybe some people put too much % of wealth in mini cash ISAs and may of got/get more gains via other investment vehicles like S&S ISAs, it is their choice. 

Any reduction in the mini cash ISA will get lots of unwanted unhappy press/feelings and looking around, I will guess this outcome will be unwanted at this time, so I'll guess this bone will be left alone for now. 

Mini cash ISAs stopped in April 2008.

ColdIron

RogerPensionGuy said:

I still think with so much bad PR about currently the Cash ISA will be left alone for now,

I think it's a racing certainty that it will happen and be announced at her Mansion House speech on 15 July

but maybe they will up other allowances to allow people to inflate the UK stockmarket as it suits views held, time will tell.

We could call it the British ISA. But that was scrapped at the last budget: 30/10/2024

friolento

hallmark said:

I would bet very very heavily that if the Cash ISA allowance is cut say from £20000 to £5000 the vast majority of money that would have gone into Cash ISAs and now can't (i.e. amounts above £5,000) will simply go into taxable savings accounts.

The people who understand shares, understand the risks and choose to invest in them already invest in them.  The people who don't are going to tend to be those saving for a house deposit, those elderly or infirm, & those who will simply never understand or trust sharedealing.

The first two categories should not be investing in shares and the third will not.

I agree, it would be extremely naive, as well as politically counterproductive, to think there would be a substantial uptake of S&S ISAs, or other investment.

kempiejon

I remember the good old days when the building society deducted my tax at source from cash savings. When low waged you could register for the tax to be paid gross if me memory is right.
I got to keep all my dividend income tax free without using any of the various vehicles, PEPs, TESSAs, ISAs, SIPPs and savings allowances that offer tax breaks.
Someone upthread said making it complicated the more reluctant uptake, probably but hasn't it always been complicated?

phlebas192

kempiejon said:

I remember the good old days when the building society deducted my tax at source from cash savings. When low waged you could register for the tax to be paid gross if me memory is right.
I got to keep all my dividend income tax free without using any of the various vehicles, PEPs, TESSAs, ISAs, SIPPs and savings allowances that offer tax breaks.
Someone upthread said making it complicated the more reluctant uptake, probably but hasn't it always been complicated?

Not sure how the first point was a positive (I was also in that position FWIW) as it just meant extra admin and a potential penalty if your circumstances changed and you forgot to inform the building society etc.

As for dividends, weren't they effectively taxed at source and you had to reclaim the tax (and was that even possible? I've got a feeling it wasn't for individuals). It was a long time ago so I may misremember but I'm pretty sure there were tax vouchers which stated the tax that had already been been paid... Dividends paid gross with a tax-free allowance is much better, even if the last government reduced the allowance to a rather small amount.

On the more general issue, I'm a bit amazed / horrified that people are using cash ISAs to the extent that they seem to be. If you are a higher rate taxpayer then having £50k in Premium Bonds covers just about every emergency fund requirement. If you are not so well off then you need over £20k in savings to have to worry about the interest being taxed so it won't affect many ordinary people.

For the vast majority of people who can afford to save more than a few £k, then once they have more than £20k (basic rate taxpayer so no ISA needed) or £50k (higher rate so use PBs) then it would make much more sense to invest in equities. 

masonic

Now can we merge the various other threads into this one, or redirect new replies?

kimwp

It's completely bonkers, there are people who need to have a large cash buffer to protect them against the market lows - retired people and other people who want to save up to not work for a while. 

How will it work if you have stocks and shares ISAs and sell them, does it have to come out of the ISA wrapper if it's more than you can add to a cash ISA that year? I can only see it making the rules more complicated - and as Martin says in his article, things will rebalance with more cash-like offerings in stocks and shares ISAs, but the general public won't understand them. There's already a tax advantage (capital gains allowance) of investing - far better (if wanting to increase investing), to push that back up again, so more experienced investors are drawn to those and less sophisticated/cautious savers don't have to risk their life savings.