Taxing ISA savings - where will this drive to make us poorer end?

[Cattreesea]

I was reading this morning that Reeves is thinking about removing the tax exemption for ISA savings.

I voted Labour and I just can't understand the direction they have chosen to take. Targeting pensioner, disabled people, now savers?

Surely people being encouraged to save for a rainy day through ISA being tax free up to a certain amount is a good thing.

I live in my own and I use my ISA to save religiously every month for house repairs or in case I lose my job.

No idea why the chancellor think that this is where she should get more money rather than finally going after wealthy corporations and individuals who are not paying their fair share of tax through clever accounting...

What else are they going to try taxing? the air we breathe?

For the economy it’s better. Creates jobs if we are out spending our money.

100% agree. Saving should be encouraged!

The irony being the rich have always had the spare cash to save so helping them never helps the economy. Giving people at the lower income level money boosts the economy as they will buy more essentials as well as an occasional small treat.

Surely that depends what it is being spent on? Many trades demand cash in hand, so don't pay tax. Since Brexit costs have increased exponentially on building and other trades and quality has gone down. We have a situation where we are being told to work as Dr's to pay for building work we can't afford because they cost more than emergency workers salaries. While the trades continue to not pay full tax "productivity" will stagnate. There's the knock on effect with children in poverty as a lot of trades don't pay for their kids and cash in hand means they don't declare earnings. Many people sitting on savings are doing so because they can't trust workmen (see other thread currently running) despite needing a lot of work doing.

well yes, that seems an entirely separate issue though.
basically people out spending is great for the economy, boost manufacturing, creates jobs which in turn creates more money going into shops etc.

however on an individual level, savings are obviously essential and better

dh is a tradesman and often gets people asking for cash (he turns them down).
you can’t hide it now really, not unless your one of the big players with a barbers or takeaway. you need the income in the bank so you can prove your income to be able to rent somewhere to live or even (bringing it back round) get a mortgage

It's all about tax, surely?
Ex was a trade too - had a certain amount he would declare and hide the rest. Most do. It also means a smooth getaway with hidden funds when divorcing...

Most of us don't want more "stuff" but we do want our homes to be safe and secure. Everyone I know with savings is trying to get work on the house done or using it on a holiday.

Although, even cash in hand jobs create jobs and have an economic benefit.
they buy materials, which means suppliers and manufacturers have work.
they have vans to buy, run and maintain. Again creating jobs. As well as still buying things for themselves

granted they absolutely should be paying tax and cannot complain about benefit fraud whilst taking cash payments.

Yeah of course. Like free childcare. Keep the worker bees working.
that in turn creates more jobs, who pay tax. They then pay tax on things they buy, which creates more jobs and more tax.

I do think our financial model relying on growth is a dangerous one, it’s catastrophic for the environment as well as unsustainable

Ex was a trade too - had a certain amount he would declare and hide the rest. Most do. It also means a smooth getaway with hidden funds when divorcing...

honestly. You can’t hide it now (unless it’s enough to run a second business like car wash or vape shop)
You might get away with an occasional couple of grand, anything over 4K has to be declared where it’s come from. Banks close accounts if they think you’re involved. You need to prove your income to rent or get a mortgage or any kind of credit. whilst older tradesman who have mortgages paid up etc may take some cash. You think how many shops don’t take cash payments now. It’s not easy to spend as it was

I've got £60k in a cash ISA - not 'hundreds of thousands' - and the 4% interest is 2.4 times the £1k savings allowance.

It’s only being discussed (allegedly) for cash ISAs to encourage more people to invest in the stock market. And I would have thought all that will happen is the tax incentives on cash ISAs will be restricted or removed, it won’t be affect any money currently in a cash ISA.

I think it sounds like a good idea, encouraging people to invest.

@IWantToGetOffHelp

Conveniently forgetting the absolute shambles of the previous 14 years! Austerity and Brexit for a start!
All governments make unpopular decisions, we have to accept that. I certainly don't want Reform or the Tories back in power.

Exactly this. The City wants more people investing. Better for them and better for people if the cash can be untouched for years.
But cash ISA's have their uses, such as keeping an emergency fund there which can grow without the interest being touched.
Personally I don't think they will change any tax free benefits of any ISA.

Well that's going to be another reason for me to spend all my savings on my children and grandchildren and have nothing left for my old age.

Is it though? It will still be your money you just won’t be allowed to put as much in annually or your interest will be taxed. ISAs have always been part of an estate for IHT purposes so no change there.

I don’t think this is the dramatic change people on here seem to think it is.

But the average person does not have 60k in cash ISA's. You're one of the ones they want to tax. As a couple we have more than that and taxing will impact us. But as i'm lower rate tax payer we'll put majority of savings in my name so at least we're not paying 40 percent tax on it.

I don't agree with it at all. But it's labours way. They will always hit the middling well.

I know I'll get blasted for this but I'm sick of being taxed more and more.

Income tax for almost 40 years, council tax, vehicle tax etc etc etc. What I've managed to save will go on care fees.

More and more tax for less and less.

Cash is much riskier than equities in the long term though, becuase of inflation.

I think it makes sense for there to be a lifetime cap on both cash and S&S ISAs rather than lowering the current annual limits, and I say that as someone who has benefited massively from the very generous limits that exist, But being able to shelter high six or even seven figure sums from from income tax and CGT at a time when the government is penalising the low paid, the disabled, the unemployed and the elderly is inequitable IMO.

It's a daft move. They won't get in again. Sorry I voted for them now, I won't be next time.

@Antsinmypantsneedtodance I am exactly the sort of person they are after as is my DH. I mean we paid higher rate tax for many years and sensibly put money in to ISA products. We are well off granted but we were net contributors for decades through PAYE. I think only half of the population are. The only thing we will claim is state pension when the time comes.

For really rich people putting £20k in an ISA each year is hardly worth thinking about. If you have millions to stash away its like small change would be to most people. I'm not sure limits have increased that much from £3,000 in 1999 to £20,000 in 2024, that's 25 years.

And banks usually pay less interest on ISAs, sometimes much less, so the tax advantage is already mitigated.

Husbands and wives can effectively take over their partners ISAs indirectly, they get an extra ISA allowance equivalent to their spouses ISA holding on death. You can't pass on in an ISA wrapper to children or other beneficiaries.

FFS - read the piece properly!

In recent days it has emerged that the chancellor, Rachel Reeves, is being lobbied by City firms to scale back or ditch tax breaks on the popular savings accounts, which are used by almost 8 million savers each year.

She's not thinking about it - as you're suggesting in your OP @Cattreesea - she's being lobbied by the City to do this. A completely different story.

I think it makes sense for there to be a lifetime cap on both cash and S&S ISAs rather than lowering the current annual limits, and I say that as someone who has benefited massively from the very generous limits that exist

Yes, I agree. It's unfair on younger people if the annual limit is lowered but a lifetime cap is not unreasonable. Of course, it has been effectively lowering over the years because of inflation.