Reeves doesn’t deny plan to slash cash ISA limit

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.

People seem to be quite willing to talk about their ISAs for some reason, we have lots of retired businessmen and forces officers. I don’t think I move in exalted circles though, just in a very mixed community - but because it’s rural we probably know more about each other than average because there’s not many of us.

You know I like the facts and figures, here they are.
www.gov.uk/government/statistics/annual-savings-statistics-2022/commentary-for-annual-savings-statistics-june-2022

Why would you think I know wealthy people?

I don't think I know many but if I do they wouldn't talk about it anyway.

It’s really not uncommon Allira, I bet you’ll know people who do this too. There are a lot of wealthy people around in beautiful parts of the country, both second home owners and retirees from elsewhere.

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 😯

rosie1959

That will prove unpopular but that doesn't seem to bother her. Labour party seem to want to tax everything.

Of course we're used to this behaviour after a repetitive cycle of tax grabs to finance spending on white elephants every 15 years or so.

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.

Financial products change over time; there’s no reason at all why ISAs won’t also evolve into an alternative product.

Her greatest problem arises from the promise not to raise income tax and (employees’) NI. That was said purely to get votes. Utterly stupid and, like the policies we are now seeing, short-sighted. This increase in defence spending will also cause cuts in spending. To the extent that it may support a peace keeping force in Ukraine, why can it not be taken from the foreign aid budget?

surely people should be encouraged to save so as not to be a burden on the state?

That would seem to be sensible too and surely should be encouraged.

Replying to knspol. Don’t forget that the assisted dying bill is likely to be passed through parliament shortly. That will sort out those of us who need care in later life so that we don’t become a ‘burden’ on the state after paying in all our lives. If I were a suspicious person I might think it was all being orchestrated!

She has been told to find more money for our armed forces contribution to NATO. They are so unpopular they probably figure they can’t get any worse so I would imagine all sorts of taxes will go up. I think we should all wear a black arm band on the anniversary of the 2024 elections to register our disgust at this corrupt government.

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?

I agree with that Doodledog, it really makes sense.

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 am fully aware that £20k is the maximum, but my point is that if money needs to be raised for defence or the NHS (or whatever) that maximum could be lowered without disadvantaging 'ordinary people', as has been suggested.

Personally, in the unlikely event that I were chancellor, I would not cut the amount in a given year, but cap the maximum that can be held tax free, for the reasons outlined (ie that low income earners, soon to include those on SP only, are taxed at £12500). It seems to me anomalous that people can have hundreds of thousands saved without paying tax - just on the interest, remember - whilst others are paying 20% on anything earned over such a low figure.

I agree that savings allow people to plan their lives, and understand the fear of risk, but if we are to have a welfare state, an NHS and an increasingly necessary defence budget the money has to come from somewhere, and putting all the burden on workers is very unfair.

I am spending much more than usual with IHT in mind.

I wish people would stop talking about ‘people who can afford to save £20k pa in an ISA’. That is, as I’m sure we all know, the maximum allowed across however many ISAs an individual may have. You are fortunate Silverbrooks, but I would say that losing 20%, 45% or 45% of the interest which your already taxed savings earn is a big deal.

sundowngirl

Casdon

Which is fair enough in my opinion Barleyfields. There’s an interesting thread on Mumsnet at the moment where the generation below us are talking about the challenges of buying a house if they live in the south east or other expensive parts of the country, and the burden of renting in retirement.
People who can afford to live in expensive areas make that choice, and shouldn’t expect to pass their good fortune on to their children when they die. I’m more in favour of using savings in helping them to buy their own homes when they are young enough to have the prospect of full ownership by the time they retire, rather than leaving them more when I die.

People who live in the 'expensive' areas don't necessarily "make that choice", they are born and bred here. We didn't move here and it's not passing on 'good fortune' to our children to enable them to live in the area where they have support groups of family and friends.
You may be fortunate enough to live in a cheaper area in Wales and can keep you family near by. Why should our children move hundreds of miles away when by inheriting from us, they could stay in the area they know and work. Not every parent has savings to help them buy their own homes as you suggest.
You obviously believe that everyone who lives in the South East is wealthy which is not the case. The majority struggle more than the rest of the country to buy a property if they ever can, and moving away isn't always a practical solution

That’s exactly why I suggested reading the thread on Mumsnet though sundowngirl. In order to buy at all, the next generation are facing the choice of moving their families to cheaper areas, or renting all their lives. I don’t believe everybody in the South East is wealthy, millions aren’t. However, people of our age group who bought houses thirty or more years ago have an asset that they can choose to remain in, or move and make a significant profit. The young don’t have that choice in many cases.

Saving in cash ISA's as opposed to Stocks and Shares ensures lack of risk. Putting extra money into pensions helps ensure a better standard of living once retired. Savings as a whole allow people to plan their lives and to be able to pay for any help/care needed in later years. This was a very sensible thing for those who could afford it, helping them and also being less of a burden on the state.
Seems that nowadays we should all spend, spend, spend and leave it for the state to look after us when the savings have gone. No incentive at all to save and look after yourself anymore.

I agree that's it's all speculation but I would also say this:

Nobody is forced to make tax free investments.

Those who can afford to squirrel away £20,000 a year (and I am one of them) can afford to pay a bit more tax on the income it earns. That 20,000 at 5% will earn me £1,000. If that were the only interest I had it would be covered by the Personal Savings Allowance so I wouldn’t have to pay any tax on it anyway. Were it not covered by the PSA I might have to pay £200 tax or even £400 for a higher rate taxpayer. It’s not a big deal.

Dont overlook the fact that if inflation hits 5% this autumn and the triple lock is retained then someone whose only income is the full new State Pension will be liable to income tax from April 2026. Meantime somone with an large ISA stack, someone who is able to save £20,000 a year may have received interest of more than the SP entirely tax free. How is that fair?

Here's what Martin Lewis has actually said:

www.walesonline.co.uk/news/cost-of-living/martin-lewis-responds-worries-over-31020730#

Martin Lewis has encouraged cash ISA savers to "keep going" as usual, despite rumours that Rachel Reeves is facing calls to overhaul the well-liked savings scheme

A cash ISA offers individuals the opportunity to save up to £20,000 each tax year with the benefit of tax-free interest. According to Bank of England figures, 2024 witnessed a record-breaking year for cash ISAs, with savers depositing nearly £49.8 billion into these accounts.

This surge in savings comes at a time when interest rates have seen an uptick, posing a greater risk for savers potentially having to pay tax on the interest accrued from their hard-earned money. Basic-rate taxpayers can earn up to £1,000 in savings interest each tax year before being liable for tax

The limit for higher-rate taxpayers is £500, and those paying the additional rate do not receive any personal savings allowance. Interest tax becomes payable on earnings from savings once they exceed these limits.

In a recent tweet, Martin Lewis reassured savers that there have been no official changes to ISAs

Amidst speculation, some suggest that Ms Reeves might be pressured to scrap or diminish the cash ISA tax-free savings allowance.

However, the Treasury has yet to confirm any such developments. Martin Lewis stated: There is no news, there's lots of speculation written up as news, but absolutely zilch has been announced

"In fact I doubt anything has been decided yet (though it is being discussed).

To those asking should I take money out of ISAs, if there are changes it will almost certainly (nothings 100%) be on how much you can contribute in future.

It would be very unlikely to impact any money already in cash ISAs. So don't do any panic moves, just keep going, nothing has happened

Doodledog

As has been said over and over, these are rumours. Like bus pass withdrawal, prescription charges and so on. At this stage we don't even know if it will happen, much less what will happen to existing savings (my guess is that they will be left alone, but who knows).

If changes to ISAs are made, 'ordinary people' don't save £20k a year per person. If those who can afford to do that are taxed on the interest, that doesn't sound outrageous to me. Yes, some of those people will be antagonised, just as some of the better off were furious at losing £200 WFP, but so be it. Pretending that the concern is for the small saver will sound as hollow as the sudden worry about benefits for pensioners.

Doodledog, £20k is the maximum that one person can save into ISAs in any financial year. I’m sure you know that. A lot of ordinary people save small amounts into an ISA, but because their savings are small they probably won’t be affected. What angers me is that if the rumoured changes come to pass many will be forced, if they want the benefit of tax free interest, to invest in a more risky stocks and shares ISA because Reeves wants to please the City. That is almost dictatorial, like so much which this government does.

The rumours seem to me to have the ring of truth. Martin Lewis, for instance, isn’t one for wild speculation.

I don’t know that some of the better off were furious about losing the WFP. Do you know anyone in that category who was furious? I don’t. Those who genuinely needed it but were just above the PC threshold were rightly furious, and so am I on their behalf. That is neither pretence nor hollow.

I understand what you are saying, Barleyfields, but the same applies (in different ways) in cheaper areas, when children have to move away to get opportunities. Many go to University, find work nearby and don’t come home. We would all like our children to live nearby, and maybe if things were levelled out that might be possible for more people?

mae13 I still can’t see how any of this is a pernicious witch hunt against the elderly. Can you explain please?

That’s entirely correct sundowngirl. A great many people have lived in the same area all their lives. The fact that an area is expensive to buy into doesn’t mean that it contains many old and poorly maintained houses which have been family homes for many years. A wealthy person buying one would probably knock it down and build something grand. Those who have always lived in that area receive little or no state investment to improve their lives, but their family home has increased in value over the years. Inheritance tax will probably mean that their similarly not-too-well-off children will have to sell it, as I had to sell my parents’ very modest bungalow in which they had lived ever since they were married and where I grew up, because over the years the area had become expensive and desirable their estates had become subject to IHT. Their bungalow and beloved garden were then redeveloped. Some think that’s entirely fair. I don’t.