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.

"Is this new government going for the jugular of anyone who’s ever tried to be financially responsible?"

I know we’re only at the start, but I’m getting seriously twitchy. There’s been talk around pensions, dividends, CGT, rental income, you name it — all the things people used to think of as sensible ways to build a bit of security. Suddenly, if you’ve done any of that, you’re basically public enemy no. 1.

I’m not talking about offshore yachts and Cayman Islands trusts. I mean people who:

Bought a flat in their 30s and kept it as a rental when they moved.
Saved into ISAs or pensions diligently for years.
Work a freelance side hustle to give themselves options.
Get a bit of dividend income from a family business.
Live frugally now to avoid working full-time until 67+.

Now it’s all being eyed like it’s greedy loophole behaviour. I get the need to fund services, but hammering the ones who aren’t totally reliant on the state seems short-sighted.

Am I being overly dramatic or does anyone else feel like this? Is it actually time to get financial advice about shifting things abroad or putting stuff into a trust? Or am I just getting carried away by the headlines and Twitter doom?

Genuinely torn between being responsible and just saying sod it and spending the lot.

I am not surprised that reducing the ISA limit per year is being considered. Just that it is only cash ISAs. Any hidden tax rise is bound to be on the cards given the current state of public finances and the unfunded employee NI cuts in 2023 and 2024.

@ThisTicklishFatball. I did say to my DH this morning… we need to spend some money.
Saving for our old age and hopefully for a kids and their kids seems stupidly naive all of a sudden.

Youre not the only one.

Sincerely,

A Millenial

Yep 👍 on this track too. Looking at how to get the balance of spending, giving to children, retiring early, maybe moving overseas.

Not only have we planned and saved but also been light users of services (not that I’m blaming those that need and use services). We have moved rapidly to a situation where taking responsibility = we’ll take anything you’ve got as well as there being a minute gap between the lifestyle of those working nmw jobs and those receiving benefits.

How many PB’s do you hold? (I understand you may it want to answer that). Every month I go through the high value win list and you need at least £30K of PB’s to have a good chance of being on the list.

This 👆

And particularly this:

Now it’s all being eyed like it’s greedy loophole behaviour

Honestly I feel the same. We arent at the stage of having thousands. But we are trying. We set up our own business. Turns over 89,999 to the penny to avoid VAT as we cant risk going through and paying 20% extra in quiet times.

Thus our income is capped. We take home c. 5.5k or there abouts from that business combined with some drips and drabs from another.

This is not far off UC we would be eligible for. I put in the minimum we would need to work and it comes out £200 ‘better off in work’. But you also need to then pay 1k nursery fees. So -£800 compared from sitting on a sofa. And we are generating £100,000s of thousands of turnover for others. Probably we are the starting funnel for half a million of goods and services at least every year.

And honestly I am just wondering what the fuck are we doing?! We are the muggins here. Why are we juggling 2 kids, 2 businesses, our sanity and our health. For little more than minimum wage / less than UC.

We are retired, and at the moment our savings are pretty equally split between cash, in isas and premium bonds, and equities, with our pension savings. As others have said, when you get older you want security for your money. Our cash savings outperform inflation with no risk to the capital. Our pension pots vary. The problem with equities is the insecurity in the world. Covid hits, values drop, Russia invades Ukraine, valus drop, Trump buggers about, values drop, Israel Bombs Iran, Values drop. They do recover, but the values seem to drop overnight, and recover over months, then the next bombshell drops. Now, if you are 30, no need to worry, as over the next 30 to 40 years the value will probably increase. If you are in your 70s, they might not recover in your lifetime. We have spent over 50 years building our savings up, so to see them make losses is hard to take.

I’m kind of looking forward to the announcement, in a perverse kind of way. You just know she’s going to dress it up as “This will be a wonderful way to invest and earn better returns over the long term”. But we all know that most cash ISA investors are risk averse (some like myself with no understanding or inclination to understand investing) and will likely shift their money to savings accounts, thus paying tax. Oh well, at least she won’t be going after Premium Bonds as they obviously benefit the government.

Cash ISA's are an oddity, poorer tax payers funding the wealthier as they accumulate large cash holdings.

S&S ISA's allow people to hold large investment funds, tax free, almost always invested in competitor economies, funded again by the tax payer.

S&S ISA's shd require the investor to put a % into the UK

I’m really fed up with this

i do S&Ss and cash ISA.

why can’t she leave it alone

she is also keeping the tax allowance the same

Yes indeed. Governments also seem to forget that people make choices based on what the Government does to screw them over. There is a sense of justice and a belief in the social contract for many. I don't mind paying taxes- I recall that the first time I earned enough to pay taxes I was really excited about it because I felt that I was really contributing. But we have saved and invested and are told that now we are solvent the Government thinks we are just arseholes who deserve to bleed. People who have really worked to be as self sufficient as possible.

If the Government wants people to take responsibility for their financial future then I think it's dangerous for them to also mandate where funds are invested. Far better to limit the amount that can be saved / invested in tax free wrappers. For pensions I think that should be capped at a level tied to average earnings somehow - maybe enough to generate an income of twice / three times average earnings.

And I also think that their should be a lifetime cap on how much can be invested in other tax free wrappers. I'd be happy if that was also set at a level more attainable for an average tax payer. Again, over a 40 year working life, £200k saved tax free (before growth) shoudl be ample.

Both of these disadvantage me quite a lot, but even I, as an avid labour party avoider, think that's fairer than increasing income tax / NI on everyone. Anyone can then have a moderately comfortable retirment supported by tax relief, and can save / invest more in non tax sheltered investments to provide a better level of retirement if they want to. Given that in general the largest tax slice on non tax sheltered investments is CGT, which is only paid on disposal / sale anyway, that can to an extent be managed and any left is caught by IHT anyway

This Govenrment has already found itself in a an unsustainable position by wanting to mandate that pensions invest part of their default funds in UK investments, when the remit of trustees of pension funds / master trusts is protecting the financial position of their investors. Another example of this govenment (secure in their almost enirely public sector / non commercial / low acheiving backgrounds) meddling in things they don't understand. Their plans will only only enrich lawyers. Imagine being made to invest some of your assets in an asset class that's not aligned with your financial objectives, it going wrong and you losing out. The 'mis-selling' claims are almost endless

Well, why should the ordinary tax payer fund tax free investment gains, when those investments are made in competitor countries?

We aren't talking about saying all the investment should be UK invested but i do think its reasonable that if you want the tax advantages, then a small amount should be in UK Plc.

The investor can then make the choice "Invest say 10% in the UK to keep 100% gains tax free or invest in say the USA and lose the tax free status"

Reeves should limit the total holdings in Cash ISA's, say 100k, after which interest is taxed, perhaps at CGT rates?

The UK market provides almost all asset classes, S&S investments carry risk, whether invested in the UK or anywhere else, plenty of pensions are very poor performers, esp those heavily invested in bonds, no mis selling... You may get back less than you invested... & as i said, the % amount is very small.

Cash ISA's are an oddity, poorer tax payers funding the wealthier as they accumulate large cash holdings.

How are poorer tax payers funding ISA cash holders?

We are not wealthy. 30 odd years ago we were on the brink of bankruptcy, with a high business loan plus mortgage and increasing interest rates, which also stopped our customers spending. But, we didn't have a holiday for several years, drove an old car, and slowly managed to start saving, in ISAs to build up a pot to support us in retirement. We were not putting £20k a year in, just what we could afford that year. For many years the interest rate was derisory, but we persevered, thinking we would benefit when interest rates increased. Now they have increased and we get a reasonable amount in interest, the gov are looking at cutting the tax benefits. The money saved in cash ISAs doesn't just sit in a vault. It is used to provide mortgages and loans for those who need it. I have lived through times where the banks have restricted money to lend, in the 70s,, and it is not nice. Apply for a mortgage to be told you are at the back of a waiting list, or the interest rate is v high. If the gov want to cut the state pension they need to encourage normal, working people to save for their retirement, and not then punish them when they manage to save.

That tax free advantage has to be paid for.. out of general taxation, much of which will be paid by people who do not have ISA's.

ISA's currently cost the Govt £5 billion per year to fund.... funnily enough, the same amount the Govt was hoping to save from the benefits bill....

Furthermore, if you work for the state, teacher, NHS, the services, local government or the civil service, you get a good index linked, guaranteed pension. If you have been self employed you build up a pot of savings to pay enough to hopefully last your lifetime. The not is not there for the gov to dip into to pay for their failures.

I won’t be grateful to the government for not taxing me on the money they already taxed me on when I earned it.

You don’t get taxed on the principal you’ve earned and put in any savings account; only the interest is taxable.

39 years of nursing without a break gives me a pension of just under 1k a month. I left on an 8a if anyone’s interested.

Years of part time while my family were young and no childcare options is the reason.

Please stop the nhs pension is a fortune bollocks

Err no one is saying the Govt is going to take your savings.

The interest and gains are unearned income, in any normal account, these will be subject to tax....

Those index linked pensions you mention may be taxed heavily, up to 40%, yet you expect your gains to be tax free, subsidised by the ordinary tax payer, many of whom wont have ISA's

Many ISA holders are also taxpayers though.

As usual, it feels like working earners trying to be sensible are an easy target for this government. For the seriously wealthy, the interest on £20k savings isn't likely to make much impact unlike a worker trying to save for retirement.

Existing cash ISAs will be unaffected AFAIK.

It would be just be eg from 5 April 2026 you can only add £5k cash (£20k total inc S&S).

The average Cash ISA is 13.5k, so are not even getting the 1k pa interest allowance, the average S&S ISA is 65k.

The tax free advantage is for the wealthy, its not for Mr & Mrs Average saving for their retirement.

That of course was the whole point of ISA's/PEPs & TESSA's, the Govt knows the vast majority wont be able to build substantial holdings but the wealthy will be able too.