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?

There’s no IHT on any transfer to a spouse.

The people who put their small savings in a bank (ISA or not) are not suddenly going to launch into the uncertainties of the stock market, or I hope they won't. How many people are sure they won't need those savings before 10 years or however long it takes to get a reasonable return on the stock market? It is unpredictable.

Now, now dont let the actual facts get in the way of the hyperbole and frothing. 🤣

I mean I say this on the basis that I think financial literacy in this country is generally pretty low, and also as someone who didn’t take pensions and investing seriously until I was in my 30s, which I now very much regret.

Small savers won’t be putting 20k a year into a cash isa. There is also only so much cash you need, excess cash you are unlikely to need should be invested so it grows. I don’t think there’s anything wrong with the government trying to encourage people to invest rather than hold onto excess cash.

Even if they scrap cash isas overnight small savers won’t be affected. They’ll still be able to save into a savings account but might be tax on interest earned.

I think a lot of people are very fearful of investing and they shouldn’t be. There are varying levels of risk you can take, and the markets always bounce back.

Reeves is in a huge mess. Her £10bn headroom has disappeared, growth forecasts by the BoE have been halved and inflation is expected to hit 3.7% this year. She is going to have to raise taxes again or break her own fiscal rules (which she'd just fudged only in October). Torsten Bell has long been an advocate of reducing/removing tax benefits of ISAs and they are running out of road in terms of what else they can tax. Politically, it's easy enough to spin as taxing wealthy people and driving growth (by forcing people into stocks and shares to drive British investment). I suspect there will be outrage if they go ahead with it.

I certainly wouldn't invest a penny of my cash in UK plc at the moment. I'd rather stick it all under the mattress.

I doubt it but who knows?

Maybe a limit on how much you can hold in an ISA, say £400k / 20 years contributions would be better, like the pension lifetime allowance.

I’m in the process of getting all my pension cash out of my Sipp tax free and put into both a Cash ISA (for early retirement) and a Stocks ISA for longer term.
It’s so I won’t pay any tax on income when I get my State pension in 8 years.
I have spare personal allowance so why the hell not?

You’re obviously entitled to do whatever you want with your money. However, what you have said is ridiculous.

Cash is not “safe” as lots of being claim it is because of inflation.

After the 2008 crash the people who kept the head and were able to leave their money invested would’ve been in profit again within 2 years. The people who lost money were the stupid ones who converted their investments to cash because they thought it was safe. Even ignoring the tax implications of that trying to time the markets in terms of reinvesting is a fools errand.

You can also invest globally, your money doesn’t have to be invested in U.K. plc.

@GutsyShark there is something very wrong indeed with the UK government trying to encourage people (for example), 5 years away from retirement, to invest in equities - just as their pension funds are swapping into bonds and cash for stability. The government is not an IFA, people have very different attitudes to risk and objectives for their savings. It's really not for government to decide investing is 'better' for all UK savings because Reeves is in a fix.

3-4% is the UK portion of Global markets, absolute peanuts.
I doubt it will ever gain a much larger one.
I came out of Vanguard lifestrategy funds because of their 25% British stance. It’s dragging them down.
I’m not sure I even fully trust Gilts any more.
Just because the UK has never defaulted on Government debt, doesn’t mean it can’t happen.

It's only speculation.i have worked in Government of both colours and they always consider everything even things that they know they will never implement.
It's simply what happens when policy is being developed . The pros and cons , risks etc of every idea will be considered.
This has always happened the difference now is so many people want to criticise this Government every little thing is blown up out of all proportion.
Wait and see what happens

Where has it been suggested it’s for all U.K. savings? As far as I’ve read this was a question asked by someone at a House of Lords committee - the government haven’t proposed anything.

And there is a huge difference between taking away the incentives for people to stockpile cash and forcing them to invest in equities.

@GutsyShark I know what happened in 2008. I've been an investment banker for 25 years, I was sitting on a bank trading floor watching it happen in slow motion. What you forget, is many, many people were made redundant, or their businesses collapsed and they had no choice but to liquidate their shares. My HSBC SAYE shares went from c.£8 to £3 overnight, I didn't need to sell mine so I was fine to ride it out, many of my redundant colleagues had little choice but to sell or loose their homes.

I don't think this will actually happen

Depends on your definition of "rich" as to whether they've bothered or not. It's certainly pretty basic stuff for independent financial advisers to drip feed monies from other investments into ISAs every year automatically up to annual limits. People with as little as a few tens of thousands may have financial advisers, but many will have investments worth several hundred thousand if not millions. They're not actively doing it, it's part of the IFA basic service.

If someone had invested the maximum into ISAs over their 25 years of life, they could have invested circa £300k and if invested in stocks and shares could be worth £900k today. Double those for a husband and wife scenario.

A couple who "could" invest £600k which is now worth £1,8m really shouldn't be getting away with not paying tax on the income/gains arising. They have more than enough funds to pay a fair amount of tax - the kind of tax that "poorer" people have no choice but to pay on much lower levels of income and gains!

That's why I maintain the levels have got out of control.

"Stupid and short-sighted" is pretty much the crux of most Labour policies tbh, so not really surprising.