What’s Reeves up to with ISA allowances?

[nahthatsnotforme]

I’ve read a couple of news items today suggesting she’s about to reduce the cash isa allowance significantly, allegedly hoping to encourage S&S isas.

This really pisses me off tbh. I won’t be putting money in S&S.

Well said.

Agree. While this might benefit younger people, for near-retirees and early-retirees this will make de-risking really tricky.

A lot depends on the age profile of the Investor/saver. A cash ISA is a poor long term vehicle for someone in their 20s or 30s, but for someone of pension age it may well be a better option, given they are probably more risk adverse.

Averse not adverse!

I thought the following was quite interesting on the discussion around the ISA changes. A 15 minute watch.

I do like Damien Talks Money in general - some thought provoking content and he has some interesting guests on his podcast too.

i'm disappointed its changing. Hopefully we'll retain the £20K limit but imagine we'll be forced to put more in S&S. I put £500 into a S&S this year, it is still in the holding account as I've no idea what I'm doing and I'm really cautious! My pension investment is enough risk for me!

Anyway, I've always been lead to believe this tax break (ie the £20K tax free) is huge and we're the only country who have something like this, so I guess we've been very luck for the last 25 years!

I'm sure this happen, it was floating about a few months ago but now I see Martin Lewis has been posting about it so no doubt it will happen, a planned reduction to £4k a year.

I'll happily admit I don't really understand much about stocks and shares, just always been cautious about them!

I don't earn mega bucks but have worled hard to save a nice pot to hopefully enable me to reduce working hours, why would I want to risk my plan just because the government have royally cocked up every decision they've made.

I’m pissed about it. I swear I’m the generation of the ladder pull. We need accessible savings as have young children and in our spend era with nursery and house renovations.

This won’t help S&S UK. FTSE is dead. If I am risking my money it’s not going there. Which leaves who? Trumps kingdom of mayhem. This is really disappointing from the chancellor.

who exactly is going to be motivated to work and save and be independent? Not the young who need all the help they can get, and certajnly
not us oldies who have been taxed over and over.

How much accessible savings do you need / do you have any interest allowance?

Interest allowance £1k/year and premium bonds still tax free if you’re paying higher rate tax on interest income.

We are currently not earning 1k interest; so you are right. At this stage it makes no difference. But in the long run it makes an incredible difference.

As I said the ladder pull generation. We have been putting in flexible ISA so we can use and withdraw with the hope that finally some will remain. We are about 2 or so years off being able to use more of the full allowance (paying c. 1k a month nursery fees currently).

It’s now going to take us 4-5 years of allowance to put in what someone a few years older could do in a year.

I might just max the credit card on 0% and take a 20k loan for this year tbh. Fed up with this nonsense.

Yep I'm now panicking about this. I've only just opened a cash ISA offering 4.5% return to keep safe a small inhertitence. Starting in September, DH and I will finally be in a position to add to that and save a large proportion of our salaries each month. This is to save for a house deposit as rapidly as we can so we can give our baby a proper stable family home and get out of rented accommodation.
We need a quick, safe return- hell will freeze over before we gamble our future in an S&S ISA. Perhaps they're more attractive for people who are already wealthy, or at least comfortable. But it'll hit families using savings for housing.

Daily Mail scaremongering yes a lot of the older generation like cash isas but the government hasn’t made a decision on this. Just lazy journalism trying to scare people.

People keep mentioning premium bonds being tax free. Well yes, but they don't pay interest. My cash ISA pays 4.5%. I do have premium bonds, but I never win, so in real terms I'm losing money on those.

Yeah but it stops them being able to claim UC or pension credit, so that might cheer up the Cabinet a bit.

I am in my 60s so won't switch to a S&S ISA as too much risk for me at my age. I really hope the cash ISA £20k allowance is kept as I'm saving for retirement. It just feels a lot of people are trying to help themselves so they're not a burden on the state. I won't have much pension. I will get full state pension as have 35+ years of contributions but private pension is low. I have 3 small DC pensions and one DB pension that will give about £4k a year. My fault as I've been self-employed for 20 years but couldn't afford to pay into a private pension. Part of that was not wanting to as the DC pensions have lost a lot over the years so I don't trust them. I just want to earn a steady, reliable amount from savings interest that isn't taxed. I don't want the roller-coaster of a S&S ISA as might not have the time to sit it out if I have to cash in when the market falls. Hopefully it won't happen but the news today has come from somewhere. It's been mooted for a while.

It is speculation. She has been urged to do it to encourage growth and investment . But until something is announced it's simply people making noise.

Well, if we want to tax wealth more, rather than income, then taxing the interest on large amounts of cash is logical. Or at least as logical as taxing wealth in the first place. No one is saying you can't continue to save large amounts of cash, you'll just have to pay tax on the interest. And it's hard to support the position that it should be possible to have a few hundred thousand in cash without paying tax on the income when holding a rental property of the same value would be taxed into the ground. Both are forms of wealth.

As there also a drive to tax unearned income in the form of dividends, rent etc more I don't see why cash should be different. We have been lucky that the limits have been so high for so long. I also think its logical to cap the amount that can be sheltered in a S&S ISA tax free - even though doing so would almost certainly disadvantage me. But I think that's fairer than increasing income tax

The chancellor, or indeed the government, has no idea how to encourage growth. There's no doubt that this move would be a simple simple tax grab by the chancellor to pay for the incoherent bunch of 'policies' that she is being bounced in to by Labour MPs and a desperate and failing PM!

As long as they don’t remove the ability to buy Short term money market funds in an S+S ISA, that’s all you have to do. You get the inter bank rate.
It means I’m going to have to alter my plans a bit as I like a Cash ISA for the short term - I’m in the process of emptying my Pension into savings before I hit state pension age.
I hope they don’t remove the Starter Savings rate as well!

BorgQueen - that was my plan long term - empty my small DC pensions into savings as they haven't performed that well, I'd rather have control of it, if anything happens to me my children won't get all of it. I'd just rather have it accessible eventually and cash ISAs are perfect for that.

Cash ISAs have only become a thing because interest rates increased, should they drop back again, their attractiveness will go.

ISA Wrap works brilliantly for couples investing in markets, 10 years of the allowance is 400k, all gains made, tax free...

People who started investing with PEPs and TESSA's then ISA's at max amounts are sitting on fortunes.. all tax free.

This of course was why these schemes were first introduced, get give the wealthy a tax break.

Is it really fair that the average person gets £1k tax free but the wealthy can easily get 100s of '000s tax free?

Reeves should keep the 20k pa but limit the total holdings that are tax free to say 100k.

I use my cash Isa as a very short term account to store money needed later in the month (stupid 28 day pay day). I use that because it's the most convenient but I'll need to set up a new savings account if they reduce the annual limit to £5k

Growth is something that has escaped all govt's in the UK, i don't think its a simple thing to get.

I know some trades - sole traders, none in the VAT bracket, they deliberately curtail their expansion to avoid the 20% increase in prices charged.

Just one example where tax system stifles growth.

Yes changes to ISA will affect me but it does need to happen, i ve just had 3 weeks in France off the back of 40k in a 2 year cash ISA.... over 3k gain tax free... why?
Even a 10% tax would help the country.

It’s not that my Sipp hasn’t performed well, on the contrary, I just want to use my remaining personal allowance to empty my Sipp tax free before I get my State pension, which will then take up my PA - most will be invested in exactly the same funds I hold in my Sipp for later years but the money in my cash ISA is for 5 years income when DH takes early retirement in around 18 months.

I’m also lucky in that I get to use the Starter rate for savings because I’m a low earner so I could technically earn up to £18k in savings interest before tax was due, not that I’m ever going to be anywhere near that amount, maybe £3500- £4k if interest rates don’t plummet.

I agree about stifled growth, DH is a sole trader Gas engineer and he could easily go above the VAT limit but at his age he’s happy to work part time, also once you get to the limit, you have to make £100k+ to make being VAT registered worthwhile. It’s not fair that turnover not profit counts for VAT. High turnover can mean lots of expenses.