Cash ISAs capped at 12,000 (a year)

Aretnap

m_c_s said:

Another mess of a policy and clearly aimed at grabbing more tax from cash or "cash like" savings when the 22%, 42% and 47% rates kick in.
The big problem is what will they define as "cash like"?
Many non100% equity funds probably have a short term bond, STMMF or even actual cash type assets in their porfolios.
HSBC Global Strategy Cautious fund for example often has 5 to 7% held in money market assets. The fund explicitly reserves the ability to invest in "money market instruments, deposits and cash" to manage day-to-day cash flow requirements and for efficient portfolio management.
Just madness.

Until 2014 "cash-like" was defined as an investment which had no realistic likelihood of losing more than 5% of it's value over 5 years.

Obviously there were a few edge cases which had to be looked at in detail but in most cases it was obvious. An equity fund which sometimes includes a few % of gilts or cash does not fall into that category; a short dated bond fund containing almost entirely gilts with less than 5 years to maturity does.

I guess if an equities fund did decide to transfer 95% of it's holding into money market funds for some reason, then after a while HMRC would tell the fund manager that he either had to start buying equities again, or give up his fund's ISA approved status.

m_c_s

Another example to the above is iShares 0-5yr gilt ETF (IGLS) which holds £186m in cash for managing cash flows (dividends etc). 
The world has moved on since 2014 when the old rules were changed. Governments only change things to make them more complex if it's to their advantage (i.e to get more tax in).

Aretnap

m_c_s said:

Another example to the above is iShares 0-5yr gilt ETF (IGLS) which holds £186m in cash for managing cash flows (dividends etc). 

That will fail the ISA test on account of containing mainly 0-5 year gilts, regardless of how much it keeps in petty cash. If you want to own it that badly you'll just have to hold it in your pension, or your general investment account. 

m_c_s said:

The world has moved on since 2014 when the old rules were changed. 

Not really. Mixed asset funds existed then, some were more cautious than others, most were ISA eligible, but a few of the very cautious ones might not have been.

m_c_s said:

Governments only change things to make them more complex if it's to their advantage (i.e to get more tax in).

I am shocked, shocked I tell you, to learn that a measure introduced in a tax raising budget might have the effect of getting more tax in.

Tommaso46

from the terminology being used by a few of the previous posters it's clear that a lot of knowledge and expertise is required to "play the market". The Chancellors idea that she is going to attract thousands of newbies by persuading them to join in is surely naive, or cynical. I see a lot of people going into a world of risk, advised by questionable "experts", and not making much money at all (which presumably would be taxed, despite the fact that it's an ISA)

Futuristic

Telegraph is reporting you will be penalised for holding money market funds and maybe even bond/gilts thats been mentioned here above inside your ISAs.

https://www.telegraph.co.uk/money/budget/hmrc-to-punish-savers-who-try-to-dodge-cash-isa-crackdown/

Grumpy_chap

jungleboy123 said:

why have they gone for under 65 to target? 

I also don't understand why the ago differential is at 65.  It would make more obvious sense if that was aligned with SP age.

Vitor

SO what do you do when you expect a market correction and want to sell and hold cash? Are we expected to remain invested and lose money due to HMRC rules?

Tommaso46

Good question

wmb194

Vitor said:

SO what do you do when you expect a market correction and want to sell and hold cash? Are we expected to remain invested and lose money due to HMRC rules?

No, you're expected to hold cash for as long as the Isa rules allow and pay tax on the interest: this is a sneaky way to tax S&S Isas. Assuming the same pre-2014 rules, that and/or buy gilts with 5+ years to maturity or eligible bond funds and hope for the best.

Pat38493

Vitor said:

SO what do you do when you expect a market correction and want to sell and hold cash? Are we expected to remain invested and lose money due to HMRC rules?

You can do that, or you can pay the interest due (keeping in mind the tax is only on the interest earnednot the capital itself), or if you are retired, leave the money in a pension and only take it out when you need it.  Some people may be limited from the latter approach if they are trying to manage their tax bands on pension withdrawals.

You can also consider potentially lower risk equity investments which pay significant dividends on value stocks, but of course those are not risk free, they just carry less risk.

The government argument will be that these kind of tax breaks are only given when you put your money at some level of risk in most developed countries - the UK is pretty much the only country that has been giving these kind of tax breaks on completely risk free investments.