Burnhams Tax on Cash ISAS and Death tax

Graphite - "I’d like to see the annual cash ISA limit reduced for everyone irrespective of age. If someone can afford to save £20,000 a year they can pay a bit more tax."

People living in the South East working two or more jobs and scrimping and scraping to save up to buy a property here, would need to save £20,000 a year if they are ever to get a deposit together. Would you penalise them by reducing the ISA limit?

Yes, this is how I understood the proposal to work. A small amount from everyone, rather than a larger amount from the richest 4% of the population.

I'm finding the way that people are supporting this notion is quite interesting.

If you left an estate worth, say, £750,000 the tax payable on it would be £75,000, whereas, assuming the appropriate allowances and transfers between spouses applied, under IHT there would be no tax due at all.

(Someone tell me I'm wrong?)

I've never been a bit earner but have always saved into my stocks and shares ISA, starting when they were called PEPS. I've actually saved enough (I believe) to pay for care when I get older and fully intend to spend the lot so that the Revenue can't get their sticky paws into it via IHT.

Graphite suggests that it isn't fair for some to have tax relief on their valuable ISAs - we went without luxuries such as holidays to enable us to pay into ours and feel that it would be very unfair to change the rules at this stage (though I can see the point of discouraging people from holding cash in S&S ISAs). Why should those of us who have saved hard be funding those who've not bothered and have spend their "surplus" income on enjoying themselves?

Sorry, can't edit, should be "big earner"!

sundowngirl

Graphite - "I’d like to see the annual cash ISA limit reduced for everyone irrespective of age. If someone can afford to save £20,000 a year they can pay a bit more tax."

People living in the South East working two or more jobs and scrimping and scraping to save up to buy a property here, would need to save £20,000 a year if they are ever to get a deposit together. Would you penalise them by reducing the ISA limit?

I think you’re over egging the situation. From next year, the ISA limit goes down to £12k for under 65s. That means they’d lose out on the interest on £8k being tax free. Assume money in a cash ISA paying 4% that would be a loss of £64 so hardly the difference between buying a house and not even if multiplied up by several years. FWIW I think it’s incredibly unfair to treat us oldies more generously with ISA limits. Why? RR brought the limit down to try and encourage investment in stocks and shares ISAs which seems very sensible. Maybe there should be two limits depending on whether cash or stocks and shares - but not age Having said that, those of us who can save upto £20k a year should count ourselves very fortunate.

We all know that since 2022, the government has frozen the tax personal allowance. Sunak said it was for two years as a post-Covid measure. Hunt extended it 2028 and Reeves extended it further to 2031. It has caused people with very low incomes to be drawn into the tax net.

It has got to such a ridiculous situation that the government has said it will have to introduce a workaround so that those with only State Pension and nothing else of just over £12,570 won’t have to pay the tax due. I see no such concession for people under State Pension age with low income.

While the government are faffing with that and all the cliff edges that will create, someone who has amassed an ISA stack of over £300,000, at current average returns, will effectively be given a tax free allowance of £25,140. For wealthy couples who have each saved the maximum each year, that could amount to £50,280 tax free.

That’s ridiculously generous and unfair.

All I was suggesting was a cap on what can be held cumulatively tax free.

There is already a Personal Savings Allowance of £1,000 for basic rate taxpayers which at current average returns is equivalent to having £25,000 in savings tax free. There is also the starting rate of £5,000 interest for people whose income from other sources is low.

Of course, it is prudent to save but the tax concessions are overly generous. They just create and ever-growing pile of dead money as far as the economy is concerned and contribute nothing to growth.

If invested in shares ie in businesses it's not 'dead money' it's keeping businesses going, creating jobs etc etc..

In the secondary market which the vast majority of stock trades are? Explain how please?

If you decide to sell your shares in a company and I decide to buy them, where does the money go?

It goes from my bank account to your bank account minus transaction fees.

Does the valuation of the estate include personal belongings eg jewellery, car, etc?

Graphite what percentage of the U.K. has £300,000 in ISA’s?

Just googled my own question and yes the present proposal would include all possessions such as jewellery, antiques, furniture, heirlooms.

Yes. Personal chattels are valued at their open-market value at the date of death, what they would realistically sell for on the second-hand market.

AuldWeegie

Just googled my own question and yes the present proposal would include all possessions such as jewellery, antiques, furniture, heirlooms.

Only if it is declared, for jewellery it would need to be listed for insurance purposes.

I doubt very much if a representative of HMRC is going to turn up and go through every deceased person’s belongings…

Graphite

In the secondary market which the vast majority of stock trades are? Explain how please?

If you decide to sell your shares in a company and I decide to buy them, where does the money go?

It goes from my bank account to your bank account minus transaction fees.

This needs saying over and over again (and I have frequently said it in the past)

Unless one buys shares which have been issued in order to capitalise a company, or recapitalise it (i.e on the primary share market) not a penny of your purchase of shares goes to the company, it all goes to the person who you buy them from (with a cut for the stockbroker which arranges the deal). It is most emphatically not keeping a business going.

Most 'investment' in shares is pure speculation. The purchasers are either looking to get high dividend payments or to make a profit on selling them on.

The money I’ve saved in ISAs was there for my possible future care needs.

I suspect a lot of older people are similar.

If we could be sure any future care needs would be met a lot of money would be released into the economy maybe, with people not afraid to spend?

Would that be a good thing!

Genuine question. The tax seems like a way forward to me but I know my level of ignorance here.

I mean if there’s a tax incentive to save they must want us to save??

I don't think the over 65's exemption is made on economic grounds, it's 100% political.
We are probably the most dependable demographic to actually turn up and vote, traditionally have disliked policies that disadvantage us financially and it could be weaponised as "taking money off the older generation who have worked hard all their lives".
I wish they didn't have to take these political factors into conisderation all the time, but that's life in a democracy.

Lathyrus3

I mean if there’s a tax incentive to save they must want us to save??

It was a Thatcher 'thing', wasn't it? Everyone must save so as to be able to support their needs in old age rather than the state providing. Making ISAs tax free was an incentive.

Fine for those who could afford to save...

I thought buying your council house was to fund your care home ?

Tuliptree

I thought buying your council house was to fund your care home ?

I thought it was so prevent future maintenance having to be paid for, by the state, on some already slightly weary properties?

Anyway, don’t get me started on this!

I loved the idea, but then Thatcher didn’t ring fence the cash and use to build more social housing and look where that has led us! Not to mention those who manage to “misuse” their new owned homes!

I thought it was also to persuade you to vote Conservative for ever 😂

MaizieD

Lathyrus3

I mean if there’s a tax incentive to save they must want us to save??

It was a Thatcher 'thing', wasn't it? Everyone must save so as to be able to support their needs in old age rather than the state providing. Making ISAs tax free was an incentive.

Fine for those who could afford to save...

So if we were sure of care and so all went out and spent instead, would that be a good thing?

For the economy.

Obviously very good for us!

Hmmmm spend spend spend - didn't end well.

Fun while it lasts 😬