Don't cut Cash ISA limit, MPs urge Government

MSE_Abby

Reducing the cash ISA allowance won't motivate people to invest in stocks and shares, a cross-party group of MPs has warned. In a new report published on Saturday 25 October, the Treasury Committee has urged the Government to leave the £20,000 limit in place – echoing previous calls from MoneySavingExpert.com founder Martin Lewis...

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'Don't cut Cash ISA limit, MPs urge Government – as Martin Lewis says 'carrot will work better than a stick' to encourage investing'

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The_Green_Hornet

https://forums.moneysavingexpert.com/discussion/6607276/reeves-isa-review

Kim_13

I’d like to know why anyone would think the government should start reform by looking at the Personal Savings Allowance rather than Cash ISAs - use of the former is more likely to result in savers achieving above inflation returns on an emergency fund that should be held in cash.

jimjames

Kim_13 said:

I’d like to know why anyone would think the government should start reform by looking at the Personal Savings Allowance rather than Cash ISAs - use of the former is more likely to result in savers achieving above inflation returns on an emergency fund that should be held in cash.

It does seem somewhat odd that you essentially get 2 bites of the cherry with tax free ISAs and then a tax free allowance too. I could see the logic in removing it so that interest is taxable as it used to be and ISAs are the vehicle for getting interest without tax paid as they were originally.

wmb194

jimjames said:

Kim_13 said:

I’d like to know why anyone would think the government should start reform by looking at the Personal Savings Allowance rather than Cash ISAs - use of the former is more likely to result in savers achieving above inflation returns on an emergency fund that should be held in cash.

It does seem somewhat odd that you essentially get 2 bites of the cherry with tax free ISAs and then a tax free allowance too. I could see the logic in removing it so that interest is taxable as it used to be and ISAs are the vehicle for getting interest without tax paid as they were originally.

IIRC the idea behind the PSA was to minimise the number of people needing to complete self assessment or otherwise need HMRC to adjust tax codes etc.

masonic

A return to the deduction at source regime would be helpful if going down that road.

jungleboy123

FT article out today saying they will cut cash isa to £12k? I think S&S unaffected....... Oh deary! Hope another false rumor

wmb194

jungleboy123 said:

FT article out today saying they will cut cash isa to £12k? I think S&S unaffected....... Oh deary! Hope another false rumor

It's written unequivocally: "Chancellor Rachel Reeves will cut the annual cash Isa limit to £12,000 in her Budget as she attempts to push savings into the UK stock market.

...

But the chancellor has dropped plans for a voluntary type of “Brit Isa” that would have had a minimum allocation of 20 per cent to UK equities, following a backlash from Isa providers and the UK’s Investment Association trade body."

https://www.ft.com/content/c134a925-7edb-4cff-bc9c-ea5563a753eb

masonic

"People close to preparations", which probably means multiple junior sources at the Treasury. The devil will be in the detail. Many will possibly be able to contribute another £4k per tax year to a cash LISA.

We don't yet know what measures will be put in place to restrict S&S -> cash ISA transfers, and how quickly they could come into force. Nor if cash-like investments could continue to be held in S&S ISAs. There has been a flurry of cash ISAs investing in QMMF, and you can do exactly the same in a S&S ISA at present.

intalex

masonic said:

Nor if cash-like investments could continue to be held in S&S ISAs. There has been a flurry of cash ISAs investing in QMMF, and you can do exactly the same in a S&S ISA at present.

Working out S&S ISA disallowed investments will be anything but low hanging fruit to accomplish by 6th April... unlikely but I hope they still allow Gilts seeing as that would be direct lending to the state...

masonic

intalex said:

masonic said:

Nor if cash-like investments could continue to be held in S&S ISAs. There has been a flurry of cash ISAs investing in QMMF, and you can do exactly the same in a S&S ISA at present.

Working out S&S ISA disallowed investments will be anything but low hanging fruit to accomplish by 6th April... unlikely but I hope they still allow Gilts seeing as that would be direct lending to the state...

So do I considering the amount I currently hold in individual gilts across my ISAs.

I shall be most displeased if I have to start juggling things around, especially as it will involve transferring a SIPP and consequently having to hand back a load of cashback from a recent transfer incentive.

I strongly suspect this will be a more gentle nudge than that, which those who are determined will be able to work around. Boosting the number of S&S ISAs, even if they are not immediately used for risk investments, could be considered a win.