Reeves doesn’t deny plan to slash cash ISA limit

Silverbrooks

... when I first heard about the threat to ISAs I was really scared and angry.

Why would you be if all you have is £20,000 in an ISA?

Perhaps you have other savings too.

Even if Reeves were to say she was going to remove all the tax advantage from a cash ISA (which is highly unlikely), then assuming it's paying 5% then it's yielding £1,000 p.a.

That's currently tax free but don't forget there is also a Personal Savings Allowance of £1,000 for basic rate taxpayers which can be set again interest from savings held in a taxable account.

At the moment, someone could have around £40,000 saved earning 5% and not have to pay any tax on it.

Exactly! And I wouldn't call anybody with savings of £40,000 poor.

Kandinsky

Labour literally hate anyone with money.
Who is actually benefiting from this government?

People who don't have £20,000 a year to save in an ISA (ie the majority).

... when I first heard about the threat to ISAs I was really scared and angry.

Why would you be if all you have is £20,000 in an ISA?

Perhaps you have other savings too.

Even if Reeves were to say she was going to remove all the tax advantage from a cash ISA (which is highly unlikely), then assuming it's paying 5% then it's yielding £1,000 p.a.

That's currently tax free but don't forget there is also a Personal Savings Allowance of £1,000 for basic rate taxpayers which can be set again interest from savings held in a taxable account.

At the moment, someone could have around £40,000 saved earning 5% and not have to pay any tax on it.

Barleyfields

You are not alone there Maizie. I no longer wish to be exposed to the volatility of the stock market, especially with the unpredictable Trump in power. If Reeves thinks that cutting back the threshold on cash ISA savings is going to force more into the stock market she may have a very unpleasant surprise - but then, we already know her capacity for strategic thought is somewhat limited.

It depends whether a new savings mechanism is introduced. As yet, we just don't know.

Most people have to compromise on home improvements (and many other outgoings), but they're not the ones who will have £20k a year to save in an ISA. They won't be affected by a reduced cap.

Allira

growstuff

MayBee70

growstuff

MayBee £5000 a year saved for five years would give you enough money to buy a small car and a new boiler.

The cost of everything is going up so much, though. Building material costs have gone through the roof, especially glass ( I need more new windows), the cost of second hand cars has increased dramatically. I’ve saved for years knowing that my house needs so much work doing to it. I have to be honest ( because I always say I only criticise other parties if I genuinely feel they’ve done wrong and it often looks as if I won’t criticise Labour about anything) and say that when I first heard about the threat to ISA’s I was really scared and angry.

But £20,000 would buy you a small second hand car, a new boiler and some house maintenance.

I was shocked at the price I had to pay for a 4 year old car when I changed mine recently (necessity not a choice).

As for home improvements, I've had to compromise because what I'd really like done was financially out of the question.
Thank goodness VAT didn't go up.

It depends what kind of car you wanted. My car is now 13 years old and I know it will need replacing soon. I've been saving for a new (second hand) one for years and I know I could find one for less than £10,000. I've never had anywhere near in savings even to pay tax on the interest.

You are not alone there Maizie. I no longer wish to be exposed to the volatility of the stock market, especially with the unpredictable Trump in power. If Reeves thinks that cutting back the threshold on cash ISA savings is going to force more into the stock market she may have a very unpleasant surprise - but then, we already know her capacity for strategic thought is somewhat limited.

although I doubt now is the right time when many economic commentators are predicting a stock market crash.

Precisely!

Which is why I have asked our investments manager to put my modest savings largely into government bonds. Nice and safe...

No, we don't but it would be understandable if changes were made to persuade people to switch how they save although I doubt now is the right time when many economic commentators are predicting a stock market crash.

I repeat, we don't know what will happen.

The headlines and the O/P repeated MSM rumours that it was going to hit the modest and low income savers in order to scaremonger (and it seems to have worked)

When a number of options like just setting a high upper limit on total ISA savings before taxing is possible.

growstuff

MayBee70

growstuff

MayBee £5000 a year saved for five years would give you enough money to buy a small car and a new boiler.

The cost of everything is going up so much, though. Building material costs have gone through the roof, especially glass ( I need more new windows), the cost of second hand cars has increased dramatically. I’ve saved for years knowing that my house needs so much work doing to it. I have to be honest ( because I always say I only criticise other parties if I genuinely feel they’ve done wrong and it often looks as if I won’t criticise Labour about anything) and say that when I first heard about the threat to ISA’s I was really scared and angry.

But £20,000 would buy you a small second hand car, a new boiler and some house maintenance.

I was shocked at the price I had to pay for a 4 year old car when I changed mine recently (necessity not a choice).

As for home improvements, I've had to compromise because what I'd really like done was financially out of the question.
Thank goodness VAT didn't go up.

As I said above, 1.6 million people put £20,000 into an ISA each year.

Gover,ment figures published Dec 2024 said that at the end of 2022 to 2023, the market value of Adult ISA holdings stood at £725.9 billion.

£71.6 billion was subscribed to Adult ISAs in 2022 to 2023. That’s just in one year.

www.gov.uk/government/statistics/annual-savings-statistics-2024/commentary-for-annual-savings-statistics-september-2024

More is subscribed to cash ISAs than Stocks & Shares ISA but the market value of S&S ISAs is higher.

There’s a fourth category of saver - not just higher earners, legatees or people with big pension pots. There are people like me who have been putting money into ISAs for 25 years and now reinvest the tax free interest from the stack, topped up to £20,000 by savings from pension income.

It wouldn’t bother me if changes were made such that I lost some tax advantage. It wouldn’t encourage me to invest in the stock market (or much anyway) as it’s too volatile especially in these dangerous times.

It would be interesting to see what happened if Reeves did do something to tax ISA stacks. I wonder how many people would buy £50,000 in Premium Bonds (assuming they don’t already have them) and hope they have at least median luck. A big influx into PBs would mean the government paying out more in prize money - it’s already 5 billion a year - or reducing the prize pot making them less attractive.

I suspect when interest rates rose in late 2022, after 14 years of almost nothing, a lot of people moved their money out of PBs and put it where they would get a guaranteed return. They might be about to move it back!

Labour literally hate anyone with money.
Who is actually benefiting from this government?

MayBee70

growstuff

MayBee £5000 a year saved for five years would give you enough money to buy a small car and a new boiler.

The cost of everything is going up so much, though. Building material costs have gone through the roof, especially glass ( I need more new windows), the cost of second hand cars has increased dramatically. I’ve saved for years knowing that my house needs so much work doing to it. I have to be honest ( because I always say I only criticise other parties if I genuinely feel they’ve done wrong and it often looks as if I won’t criticise Labour about anything) and say that when I first heard about the threat to ISA’s I was really scared and angry.

But £20,000 would buy you a small second hand car, a new boiler and some house maintenance.

I realise that house maintenance isn't cheap and obviously you will need to save up for big projects, but it's probably better to pay for small jobs as they arise because interest rates (even tax free) are outstripped by inflation.

You can have about £20,000 in savings (depending on interest rates) without paying tax on them anyway because you have £1000pa savings allowance.

It's easy for me because I don't have a house and have virtually no savings anyway, but I'm not somebody who thinks that saving to give money away to me children when I die is a good idea.

We don't know what is actually being planned. Apparently about £70 billion a year is squirrelled away in ISAs, which doesn't do the economy much good. The people who gain most from ISAs are higher rate taxpayers and I don't see why they should have a subsidy from the government when so many don't even have £20,000 a year to live on, never mind save.

growstuff

MayBee £5000 a year saved for five years would give you enough money to buy a small car and a new boiler.

The cost of everything is going up so much, though. Building material costs have gone through the roof, especially glass ( I need more new windows), the cost of second hand cars has increased dramatically. I’ve saved for years knowing that my house needs so much work doing to it. I have to be honest ( because I always say I only criticise other parties if I genuinely feel they’ve done wrong and it often looks as if I won’t criticise Labour about anything) and say that when I first heard about the threat to ISA’s I was really scared and angry.

MayBee £5000 a year saved for five years would give you enough money to buy a small car and a new boiler.

I agree Doodledog. We don't even know what is going to happen. Interest already accrued in previous tax years can't be taken away and/or taxed.

I'd like to see them return to their original purpose, which was to incentivise small savers, not for quite substantial amounts.

I'd be surprised if you have anything to worry about MayBee. If changes are made to ISAs it will almost certainly be going forward, not retrospectively, so your money will be safe where it is.

growstuff

MayBee70

I’m really worried about this. I live quite frugally and put as much as I can in my ISA crisis fund as it has to be in something safe.

If you are putting £20,000 a year into an ISA, I would suggest that you have no need to live frugally. The vast majority of people would be delighted to have £20,000 after paying for essentials such as housing, heating and food.

My feeling that something in the region of £5,000 would be more realistic. This would give people with very modest incomes an incentive to save.

The only people with £20,000 available are a) high earners b) people with inheritances (in which case they personally have done nothing to earn the money) c) people with retirement lump sums (in which case they didn't pay tax on the money when they made their contributions and I don't really see why they should get a tax boost)

MayBee70 There are other safe savings schemes, although they might not pay so much interest, if you have to pay tax on your interest.

I don’t usually have £20,000 a year to put in an ISA. But I had saved up enough to replace my car and my boiler at some point in the future and I stupidly left it in my current account, not realising that interest rates had improved ( it was someone on here that told me that so I went straight to the building society and put it in an ISA).

Doodledog

Norah

Doodledog

Agreed, Allira, which is why lowering the amount that can be made in tax-free interest is (IMO) a fairer idea than increasing taxes on those who are already stretched.

Nobody suggested increasing taxes on those who were already stretched.

No, but my point is that assuming money needs to be collected, it should be done so in as fair a way as possible. People are taxed on earnings of over £12500, which is a very low threshold, yet at the same time people can save significant sums of money and pay no tax on the interest. Does that really seem fair?

Like you, I would like to see thresholds raised, but the principle would still apply.

I agree with you Doodledog.

MayBee70

I’m really worried about this. I live quite frugally and put as much as I can in my ISA crisis fund as it has to be in something safe.

If you are putting £20,000 a year into an ISA, I would suggest that you have no need to live frugally. The vast majority of people would be delighted to have £20,000 after paying for essentials such as housing, heating and food.

My feeling that something in the region of £5,000 would be more realistic. This would give people with very modest incomes an incentive to save.

The only people with £20,000 available are a) high earners b) people with inheritances (in which case they personally have done nothing to earn the money) c) people with retirement lump sums (in which case they didn't pay tax on the money when they made their contributions and I don't really see why they should get a tax boost)

MayBee70 There are other safe savings schemes, although they might not pay so much interest, if you have to pay tax on your interest.

Norah

Doodledog

Agreed, Allira, which is why lowering the amount that can be made in tax-free interest is (IMO) a fairer idea than increasing taxes on those who are already stretched.

Nobody suggested increasing taxes on those who were already stretched.

No, but my point is that assuming money needs to be collected, it should be done so in as fair a way as possible. People are taxed on earnings of over £12500, which is a very low threshold, yet at the same time people can save significant sums of money and pay no tax on the interest. Does that really seem fair?

Like you, I would like to see thresholds raised, but the principle would still apply.

I didnt answer earlier Allira. You say

"So once again the person who manages to save just a little, put a pension lump sum aside etc, in case they need to pay for home repairs, perhaps an operation to make their life bearable because NHS waiting lists are years long, is being penalised because of a few wealthy people"

I don't think this group should be penalised tax wise I think it's part of modest rainy day savings, tax if its going to be levelled only applied after a certain level.

I’m really worried about this. I live quite frugally and put as much as I can in my ISA crisis fund as it has to be in something safe.