Reeves doesn’t deny plan to slash cash ISA limit

Doodledog

*Norah*, I agree that people should be encouraged to save, but money is not invested in cash ISAs - it is saved, and RR wants to see more investment.

The best way to encourage small savings would be to stop penalising people for doing so by means-testing so much. People who may be able to afford saving least are likely to be hardest hit by means-tests, when they find that their savings push them over thresholds, when not saving would have entitled them to financial help (eg pension credit and associated benefits, free social care and so on).

Doodledog Norah, I agree that people should be encouraged to save, but money is not invested in cash ISAs - it is saved, and RR wants to see more investment.

Yes, word used improperly. RR wants investment, I encourage saving.

Not that anyone cares what I encourage!

growstuff

GrannyGravy13

Doodledog

What will disincentivise people? We have no idea what (if anything) is going to happen .

Taxation may not fund spending (in which case why have it?), but neither are savings taxed - just the interest.

We are going round in circles Doodledog the money saved has already been taxed when earned.

Interest is only taxed after £1,000 basic rate tax payer £500 next bracket and £0 for top rate tax payers.

Why do citizens have to be taxed twice on earned money?

GrannyGravy I don't understand why you keep contradicting Doodledog. Any money you have sitting in a savings account isn't taxed - the interest is, although it might stop people from claiming means-tested beenfits.

I know it’s interest that is taxed.

No, I think Labour are looking for a compromise Calendargirl

We live in a society where some one might work really hard all their working life and not be spendthrift, but have not - either because of income levels, or other factors out of control.

(for example, my granddaughter is so severely disabled that all the family money saved either has to be spent on her now or will be in the future - and need services from the state, that the more fortunate have paid into)

You are also paying - with this compromise -for provision of education for the benefit of society as a whole which we rely on, and even a basic NHS we can never know what health problems could be and now defence.

thats why

Why have I got savings, any savings, ISA’s, deposit accounts, premium bonds?

Who knows what both DH and I will need as we age?

Help in the house and garden, potential new hips and knees, (no intention of sitting on an NHS waiting list for years), and nursing home care for us both if, God forbid,, we get to that stage.

That is why we have worked and saved, for a less worrying future, we hope.

And if we don’t need any of this, then I hope our AC and GC will benefit from our efforts.

Otherwise, why have we bothered?

In the words of the late Viv Nicholson, we may as well “Spend, Spend, Spend!” and not worry about being a burden on the state.

Is that what Labour want us all to do?

Thanks for that sensible post Silverbrooks.

GrannyGravy13

Doodledog

What will disincentivise people? We have no idea what (if anything) is going to happen .

Taxation may not fund spending (in which case why have it?), but neither are savings taxed - just the interest.

We are going round in circles Doodledog the money saved has already been taxed when earned.

Interest is only taxed after £1,000 basic rate tax payer £500 next bracket and £0 for top rate tax payers.

Why do citizens have to be taxed twice on earned money?

GrannyGravy I don't understand why you keep contradicting Doodledog. Any money you have sitting in a savings account isn't taxed - the interest is, although it might stop people from claiming means-tested beenfits.

Around 1.6 million ISA holders used the full £20,000 annual ISA allowance, according to HMRC’s most recent figures, equating to roughly 7% of all ISA holders.

I have put money into an ISA most years since 2000 when they were introduced (I was 45 then) as did my late husband for a few years until his premature death.

For the first seven years, the limit was £3,000, then increased slowly.

It wasn’t until 2015 that the ISA allowance was increased by George Osborne from £5,760 to £15,000, far above the personal tax allowance. In 2018 it was increased to £20,000 where it has remained.

Don’t forget that we’d had a massive financial crash in 2008. Interest rates for savers were on the floor and the stock market took time to recover. Even if someone put a large sum into an ISA they weren’t going to earn much on it. People with savings were withdrawing their funds from cash and shares, jumping on the the buy-to-let bandwagon in droves, pushing up house prices, forcing young people wanting to buy their first home to borrow more so there was a need to attract more liquid investment.

Before 2015, the ISA limit was considerably below the personal tax allowance. So it can be argued that until 2015, ISA subscriptions came from the untaxed element of earnings and pensions.

I retired from paid work in 2021 when I was 66. Since then, I could argue that half of my ISA subs come from my State Pension which is a taxable source of income but below the limit of the personal tax allowance.

I pay tax on occupational pensions, of course, but over the decades that I paid into those pension schemes I received tax relief on those contributions.

So this notion of double taxation doesn’t entirely hold up.

I think the annual ISA allowance should be reduced and a limit placed on how much of a stack can be held tax free.

GrannyGravy13

I think we all know that ISA’s profits are not taxed.

About the only thing that isn’t!

Your posts kept saying (or certainly implying) that people would be taxed on ISA savings

The whole thread is about the speculation that cash ISAs may be changed in some way.

to bring people to saving, not to "Being people into saving"

GrannyGravy13

I wonder if this has any relation to the amount of millionaires made through lottery wins?

No idea on that, GG13, but of course not all ISA's are bought by people from their own earnings - small or large inheritances must feature.

I actually had no idea (yes, naive) that people were salting away so very much money at the top end with tax benefits.

To me, ISA's were really intended for low or modest earners, saving for a deposit, a reasonable rainy day amount for if the roof needs doing, that sort of thing. To being people to saving that had never really previously done it. I had no idea there were ISA millionaires or close to it, and certainly dont approve of them getting the tax breaks when we need to raise money for NHS and so on.

There is something wrong to me to have foodbanks and people getting ISA tax breaks as millionaires.

I think we all know that ISA’s profits are not taxed.

About the only thing that isn’t!

GrannyGravy13

Doodledog

What will disincentivise people? We have no idea what (if anything) is going to happen .

Taxation may not fund spending (in which case why have it?), but neither are savings taxed - just the interest.

We are going round in circles Doodledog the money saved has already been taxed when earned.

Interest is only taxed after £1,000 basic rate tax payer £500 next bracket and £0 for top rate tax payers.

Why do citizens have to be taxed twice on earned money?

They aren't. The savings (usually) have been taxed before going into the ISA, but the interest is not. Of course it would be if it were in a non-ISA savings account, but the whole point of ISAs is that they are not taxed.

Ps what is this thing you call excess income please, Norah?

I’m sure lottery millionaires are given the same advice by their financial accountants as everybody else who uses one GrannyGravy13, to use up your ISA allowance first before any other savings methods.

Norah

Allira

Casdon

Barleyfields

The people who have saved the hypothetical hundreds of thousands of pounds (which with ISAs would take at least two decades to accumulate at current rates) have already been taxed on the money saved, maybe at 45%. There are certainly better ways than an ISA to invest that amount of money though, and surely people should be encouraged to save so as not to be a burden on the state?

A couple could save £40k in ISA’s every year, so would accumulate £120,000 every three years. I know people who have done this for decades, it’s not uncommon. It’s the first thing financial accountants tell you to invest in, unless you are a gambler who is prepared to go into high risk high reward options.

It never ceases to amaze me the social circles some Gransnetters must mix in 😯

Some people save excess income. No coffees out, meals out, nails, latest gadgets, moving house if not necessary - they save to the future.

Saving £20k pa accumulates to £100k in five years (plus interest) for a couple £200K in 5 years. Already taxed at earning.

Surely people should be encouraged to save indeed saving should be encouraged and indeed accountants advise many people to invest in cash ISAs.

That's precisely what I mean
Some people save excess income. No coffees out, meals out, nails, latest gadgets, moving house if not necessary - they save to the future.

We could not afford coffees out, meals out, latest gadgets, only moved when necessary when we were bringing up a family so who are these people who did? Not in our circle, certainly.

As for nail bars - I've never been to one in my life. I did and do go to the hairdressers - do you think perhaps I should have cut it myself as I did the DC's and DH's hair? I could have put that £20 or so saved every couple of months into an ISA and accumulated - 🤔 how much? A couple of thousand over the years.

How the other half live!

Doodledog

What will disincentivise people? We have no idea what (if anything) is going to happen .

Taxation may not fund spending (in which case why have it?), but neither are savings taxed - just the interest.

We are going round in circles Doodledog the money saved has already been taxed when earned.

Interest is only taxed after £1,000 basic rate tax payer £500 next bracket and £0 for top rate tax payers.

Why do citizens have to be taxed twice on earned money?

the article goes on

"One expert who thinks ISAs could make an appearance in the Autumn Budget is Elsa Littlewood, private wealth tax partner at the accountants BDO. She says ISAs are costing the Exchequer almost £5 billion a year in tax relief.

“Cutting this cost by reining in ISA benefits for wealthy investors might be seen as an easy way to help balance the books.”

She adds: “It’s not impossible that the chancellor could seek to impose a lifetime cap on ISA saving – perhaps at around £500,000."

I wonder if this has any relation to the amount of millionaires made through lottery wins?

What will disincentivise people? We have no idea what (if anything) is going to happen .

Taxation may not fund spending (in which case why have it?), but neither are savings taxed - just the interest.

reference moneyweek.com/investments/isa-millionaires-triples-three-years#:~:text=Analysis%20by%20the%20investment%20platform,£750%2C000%20in%20their%20ISAs.

Some facts about rich ISA holders: October 2024

"The number of ISA millionaires has more than tripled in three years, according to a Freedom of Information request to HMRC.

In 2022/23, there were 3,180 ISA millionaires.

This compares to 1,030 three years ago, and just 570 eight years ago.

Analysis by the investment platform InvestEngine reveals that there are also 7,000 people in the UK with ISAs worth between £750,000 and £1 million,

while 30,000 have between £500,000 and £750,000 in their ISAs.

What is the amount that might be gained by IHT from farmers and this suggested cutting of the ISA limit plus the money saved by stopping the WFA to many pensioners?

It would be much simpler to adjust income tax, ensuring that the Personal Allowance is increased. That was a sly move too freezing the PA, by Sunak

Doodledog

GrannyGravy13

Doodledog if people are saving out of their salaries, the hundreds of thousands (how do you come to that amount by the way?) have already been taxed, that is why interest over a certain amount is taxed not the amount saved

Why should our money be taxed twice, which is basically a penalty for being prudent and saving?

I know. I have both cash and S&S ISAs myself, and would lose out if the rumours turn out to be true. Nobody wants to pay more tax, but surely it is fairer that better off people pay more? And the money saved has been taxed, but the interest hasn't, which is the point of putting it into an ISA.

(the figures have been posted by others upthread, based on a couple saving the maximum every year)

Doodledog better off people do pay more tax on their earnings 45% currently and a lot more (depending on governments) previous years.

This will disincentive people to save for their old age, I am beginning to understand the spend and enjoy it while you can mentality.

Labour as always is very good at spending other people’s money.

Taxation does not fund spending.

Norah, I agree that people should be encouraged to save, but money is not invested in cash ISAs - it is saved, and RR wants to see more investment.

The best way to encourage small savings would be to stop penalising people for doing so by means-testing so much. People who may be able to afford saving least are likely to be hardest hit by means-tests, when they find that their savings push them over thresholds, when not saving would have entitled them to financial help (eg pension credit and associated benefits, free social care and so on).

GrannyGravy13

Doodledog if people are saving out of their salaries, the hundreds of thousands (how do you come to that amount by the way?) have already been taxed, that is why interest over a certain amount is taxed not the amount saved

Why should our money be taxed twice, which is basically a penalty for being prudent and saving?

I know. I have both cash and S&S ISAs myself, and would lose out if the rumours turn out to be true. Nobody wants to pay more tax, but surely it is fairer that better off people pay more? And the money saved has been taxed, but the interest hasn't, which is the point of putting it into an ISA.

(the figures have been posted by others upthread, based on a couple saving the maximum every year)