New ISA limit 2025 - Fixed rate ISA

Kim_13

jimjames said:

badmemory said:

They will need to factor in how long it will take the banks to set up the new systems & I suspect that next April will not be long enough for them.  I expect that if this does happen the banks will be saying they cannot stop people from saving more than they should in cash.

I find that hard to believe. A simple change to the limit could be implemented very easily I suspect.

I agree. Each ISA provider will have needed to be prepared to stop their ISAs accepting more than £X per tax year, with notice of what X would be for the following year likely coming in the budget.

Even though multiple ISAs of the same type are a recent change, it's been the same principle for decades. The customer could always have potentially exceeded the limit as the provider had and has no way of knowing what they might have subscribed to other types or ISA. Overall responsibility for compliance with the rules lies with the customer and providers don't need to develop a system for this. 

I would say in-year changes would be harder, though. The system would likely spit out valid subscriptions as breaches if the limit were lowered in the middle of July. They can't just change it to identify anyone who pays in more than £5K from July to April 5, since not everyone will have £5K allowance remaining. Certain providers found/find it difficult to adjust to the 2024 changes even though they were only required to put the age limit up by 2 years for new applicants and stop telling customers that they couldn't subscribe with them if they had or would subscribe with another provider in the same tax year.

clairec666

Kim_13 said:

I would say in-year changes would be harder, though. The system would likely spit out valid subscriptions as breaches if the limit were lowered in the middle of July. They can't just change it to identify anyone who pays in more than £5K from July to April 5, since not everyone will have £5K allowance remaining. Certain providers found/find it difficult to adjust to the 2024 changes even though they were only required to put the age limit up by 2 years for new applicants and stop telling customers that they couldn't subscribe with them if they had or would subscribe with another provider in the same tax year.

I can't see how any changes can come in during the tax year. It has to be next April, surely. Otherwise I can see a lot of confusion happening. And a crazy rush of people trying to cram in the full £20000 before the limit goes down.

Kim_13

Ocelot said:

I can imagine the media's response if they did do this: 'Reeves robs grannies to pay her city mates' (which wouldn't be far from the truth). It may result in such an outcry that they'd have to U-turn again.

It's probably true that any retrospective removing of the ISA wrapper would disproportionately impact pensioners. No one under 41 was old enough to have opened an ISA in their first year of availability and likely teens and young adults weren't the ones making the maximum use of them. 

Such a change is very unlikely though. Everyone would need to be asked which of their accounts they wanted to keep inside the wrapper, since oldest subscription first is only a fair way of doing it when the customer actually breaches the rules at the point of adding later money. And removing people's fixed accounts from the ISA wrapper would mean that the ability to access their money upon payment of a penalty had been taken away. Ordinary fixed accounts are no early access outside of the cooling off period at best.

masonic

To keep on top of a lifetime cap, what's needed is some sort of real time reporting system. So maybe by 2050? Then what happens to annual growth and interest?

Ocelot

Albermarle said:

Ocelot said:

I can imagine the media's response if they did do this: 'Reeves robs grannies to pay her city mates' (which wouldn't be far from the truth). It may result in such an outcry that they'd have to U-turn again.

Although in reality it would only be pretty well off people , who would be affected by the £20K annual limit dropping.
Not sure many Grannies can afford to add £20K pa to an ISA. I think about 50% of the population has either zero or very limited savings.

I was actually referring to the idea of not being able to transfer out existing ISAs to another provider without it becoming taxable.  Agree that not many grannies have 20k per year to save.

savik2

I don't see how reducing the maximum allowable investment in Cash ISAs will result in more investment in Stocks & Shares.  Surely the ISA providers themselves are taking the money deposited by Cash ISA investors and using that to invest in a wide range of markets, including stocks, shares, bonds, gilts, property portfolios, etc., many of which are not in themselves tax exempt.  The banks' fund managers are experts in making money work hard in a way the general public cannot, utilising the economies of scale as much as anything else.  I am surprised at the Chancellor thinking that restricting Cash ISAs will encourage individuals to dabble in markets they do not understand.  If she looks at any social media thread relating to the taxation of interest, she will see that an awful lot of people would prefer to stash their savings under the mattress than put them in a bank where the interest can be taxed.  I believe the Exchequer would do better by introducing basic Money Management to the National Curriculum so that the public can better understand how to make their money work for them.  I certainly wish I knew more about how Stocks & Shares work - my attempts so far have proved rather less profitable than the steady returns offered by Cash ISAs and Fixed Term Bonds.  S&S seems to me to be as much a gamble as betting on a horse.