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

Aretnap

kimwp said:

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?

That one's easy - you could continue to hold the cash in your S&S ISA, and you could even earn interest on it. However any interest paid on cash within a S&S ISA would be taxable.

That's how it worked until 2014 at any rate. It's strange to see people react as if this is some horrific, unprecedented, incomprehensible proposal when actually it's just literally reverting to the system as it was for most of the time that ISAs have existed.

Aretnap

GazzaBloom said:

If the cash ISA limits are reduced it's easy enough to use a stocks and shares ISA and buy a short term money market fund, which is typically viewed as “cash like” and elevate the 2 finger royal salute to Rachel from accounts. STMMFs are typically going to pay interest closer to BOE base rate than high street bank cash ISAs anyway.

Back in the good old days when there was a separate limit for cash ISAs, money market funds and some other very low risk, cash-like investments were not eligible to be held within a S&S ISA, for precisely that reason. Reverting to the old system would presumably require that rule to be reinstated.

Cobbler_tone

I don't see a huge issue if they are coming for us somewhere. I'd prefer this to hitting income tax, or more likely a reversal of the reversal of the NI changes. Ultimately, most can get £1,000 of interest tax free in saving accounts before even touching an ISA. Then there is the option of tax free Premium bonds. Those with £100k+ in ISA's and fat pensions are the most fortunate but often make the most noise. You're also not losing it, you'd just have to pay a bit of tax. There should be far more noise around the tax bands being frozen for what seems forever...the stealthy taxes!
First world problem IMO if they do reduce the limit.

tghe-retford

This sends the message that saving is wrong and people should not do it. Particularly coming from a time where saving rates have not kept up with inflation, taxing them will be the final straw and people are going to pull savings out of the banks. 

I suspect they'll go even further, particularly with events last night, and potentially spell the end of tax free saving alongside other tax rises. 

Cobbler_tone

tghe-retford said:

people are going to pull savings out of the banks. 

Under your bed?

There is little doubt that spending more and saving less is good for the economy. Most relevantly those who save to the grave.

jimjames

pecunianonolet said:

Another great argument for moving my tax residency away in the next couple of months and invest where I get something in return, working services and where creating wealth and working hard for it making sacrifies to build something is appreciated and not patronised and penalised. 

Where is this mythical country?

Cobbler_tone

The government are pretty obviously going to raise taxes, last night cemented that. I'd suggest starting with ISA's is an area where most could afford to pay a bit more but I am sure it won't be the only place. There'll be a ripple rather than universal outrage if it comes in.
It's funny, as a certain cohort wouldn't be half as riled if NI went through the roof. 

There are always other options to squirrel away your oodles of £, although it is becoming increasingly difficult to avoid contributing your pound of flesh throughout your adult life. "I've worked hard all my life" blah, blah.
Whilst some will be still bunging every available penny into an ISA and contributing 3% to their pension. Smarter, not harder. Yeah, I'm sure they'll come for that too.

The best lesson I ever had (and how I live my life) is not to waste too much energy, anger and worry over something you have absolutely no control over. Let it pass. Save your disappointment and despair for the next lot that have a go at making us all happy.

LHW99

IG's "Save Our Stock Market" initiative argues that cash ISAs are "hindering rather than helping" people build wealth, with analysis showing cash savers have earned just one-seventh of the real returns achieved by equity investors since ISAs launched in 1999.

And the building societies think that: "Cash ISA changes could make mortgages more expensive and negatively impact mutuals"

https://www.mortgagesolutions.co.uk/news/2025/02/21/cash-isa-changes-could-make-mortgages-more-expensive-and-negatively-impact-mutuals-leeds-bs-ceo-says/

Back in the good old days when there was a separate limit for cash ISAs, money market funds and some other very low risk, cash-like investments were not eligible to be held within a S&S ISA, for precisely that reason.

And I seem to remember that you also had to invest cash deposits fairly quickly, as you were not supposed to hold more than a small amount of cash of any kind in an S&S ISA (or PEP?)

gropinginthedark

I have a cash ISA because it delivers a reasonable rate of interest and the initial capital is not at risk. I also have stocks&shares ISAs, looking back over a few years the performance has been "unexciting" but OK.  I have some S&S ISAs with a high risk profile, they have have dived in value on occasions but overall give better returns than cash ISA or those with low-risk S&S investments.
  
Worst of all is the IHT ISA, the money was invested in high risk UK smaller companies (only quoted on the AIM - alternative investment market). This was a government incentive scheme to encourage investment in AIM shares. The benefit was that it would be free of IHT. 

Rachel scrapped that promise, so it's now taxed at 20% (rather then the full IHT 40% rate). That ISA has been a real roller-coaster ride, i.e. mostly downhill, it was only the IHT benefit that made it worth holding on to.  At the reduced rate I'm cashing out. And Rachel thinks I'm going to be interested in adding to my S&S ISA portfolio. NO, it's going to the cash ISA where (at present) it might at least get close to tracking inflation.  If she ditches that then, like so many of my colleagues I might as well spend it, it's going on international travel having passed whatever I can get away with to the kids.

Another option, Emigration, is probably out of the question for me but three of my friends have followed their medically qualified kids to Australia or NZ, removing two generations from the grasp of yet another economically inept UK government.

Section62

Cobbler_tone said:

tghe-retford said:

people are going to pull savings out of the banks. 

Under your bed?

There is little doubt that spending more and saving less is good for the economy. Most relevantly those who save to the grave.

I'd suggest there is significant doubt that is entirely true.... especially where folks spend their way through their meagre savings and become reliant on the state to support them through retirement to the grave.

As with most things in life, there's some balance required.