Limit on value held in Stocks and Shares ISAs

EddieQ

If restrictions were  brought in simply by preventing further contributions to stocks and shares ISAs after more than a certain threshold value had been reached that would be one way to implement such a measure. But removing the tax-free status of amounts already invested in existing stocks and shares ISAs—whether by taxing future capital gains or income on amounts above the cap — would constitute blatant retrospective taxation. It would be begging for legal challenge. 

The argument that ISAs were never intended to shelter sums possibly running into a million pounds or more may be valid, but this should have been thought about when ISAs were first introduced in 1999. It's way  too late to do so now - even if the state needs the money. 

masonic

EddieQ said:

If restrictions were  brought in simply by preventing further contributions to stocks and shares ISAs after more than a certain threshold value had been reached that would be one way to implement such a measure. But removing the tax-free status of amounts already invested in existing stocks and shares ISAs—whether by taxing future capital gains or income on amounts above the cap — would constitute blatant retrospective taxation. It would be begging for legal challenge. 

The argument that ISAs were never intended to shelter sums possibly running into a million pounds or more may be valid, but this should have been thought about when ISAs were first introduced in 1999. It's way  too late to do so now - even if the state needs the money. 

In any case, it's unlikely investors or investment platforms would have the detailed records required to assign a base cost to investments held in a S&S ISA that has been around long enough to reach the cap value. Also, what would happen if the ISA subsequently suffered capital losses?

EddieQ

masonic said:

In any case, it's unlikely investors or investment platforms would have the detailed records required to assign a base cost to investments held in a S&S ISA that has been around long enough to reach the cap value. Also, what would happen if the ISA subsequently suffered capital losses?

All excellent points. Bear in mind though that at the time the 2023 paper from the Resolution Foundation on ISAs was published, Torsten Bell was its Chief Executive. And now the same Torsten Bell is a junior minister (pensions) in the present Labour administration. 

Albermarle

EddieQ said:

masonic said:

In any case, it's unlikely investors or investment platforms would have the detailed records required to assign a base cost to investments held in a S&S ISA that has been around long enough to reach the cap value. Also, what would happen if the ISA subsequently suffered capital losses?

All excellent points. Bear in mind though that at the time the 2023 paper from the Resolution Foundation on ISAs was published, Torsten Bell was its Chief Executive. And now the same Torsten Bell is a junior minister (pensions) in the present Labour administration. 

Good point.
For sure there is a left of centre political case for restricting some tax free 'perks' for the better off.
ISA's largely benefit the better off, and higher rate pensions tax relief does the same.
So not surprising that a pressure group for lower income groups, should suggest changes.

However in Govt., you have to look at the practicalities which are often complicated, and measure the potential political fallout against any benefits. Plus it will be No10 and 11 who will decide, not a junior minister.

jimjames

EddieQ said:

There have been  reports that the Treasury may be considering bringing in  a limit on the value held in stocks and shares ISAs, potentially as part of the future budget.

Where are these reports? I've done a google search and can't find anything about such a proposal. Can you provide some links?

The_Green_Hornet

jimjames said:

EddieQ said:

There have been  reports that the Treasury may be considering bringing in  a limit on the value held in stocks and shares ISAs, potentially as part of the future budget.

Where are these reports? I've done a google search and can't find anything about such a proposal. Can you provide some links?

ISA ISA Baby • Resolution Foundation

bioboybill

That report was over 2 and a half years ago.

masonic

bioboybill said:

That report was over 2 and a half years ago.

That's right. Much more recent than the forecast that higher rate tax relief on pension contributions might be axed, and that still hasn't happened. I expect this too will be a perennial favourite.

jimjames

bioboybill said:

That report was over 2 and a half years ago.

Exactly. The OP said there were reports the Treasury were considering it. The only report of that so far appears to be from the OP. Even that link isn't from any government source

Hattie627

I read a report that Reeves was keen to revive the old investment income surcharge. In the bad old days a few high income taxpayers paid 98% tax on some of their investment income. Reeves might raise that top figure to 105%, so that the Treasury gets all your investment income above the threshold plus a bit more. Sounds fair.