The Lemon Fool

Dod101 wrote:I think that they would have to leave existing ISAs as they are but put a limit on ISAs currently under the new limit (which would surely be more than £100,000.) I have to say that I am sympathetic to the idea of imposing a limit for an ISA because I have paid very little tax for some years now and that genuinely does not seem very logical.

Dod

I agree. The same principle as when they introduced the pensions lifetime allowance. ('A' day, in 2006 I recall) One could elect then to have no limit as long as you made no further contributions to your pension funds. It was called Enhanced Protection, which I took up even though at that point my pension fund was only about half the limit.

People may have ISAs with several different managers and one of the points of ISAs was that you didn't need to keep any records of income, acquisition costs, gains etc etc. It would be incredibly complicated to introduce the sort of tax arrangement these pressure groups suggest but not difficult to identify those not allowed to make further contributions as ISA managers already make returns of ISA total values each year to HMRC.

But there must be bigger fish to fry (pensions tax relief!). Given the likely loss in IHT revenue if they do this, it really is not worth it.

Adamski wrote: Arguably we are at the peak of the laffer curve already

That's a familiar argument for those that oppose tax rises. But based on what?
UK takes 33% of GDP in tax. Denmark 49%. EU average 41%. Which would imply we are nowhere near the top of the taxation curve. Not even close.


On the original point, a £100k limit would be very "unfair" for those of us who chose to save for our retirement in ISAs rather than Pensions. Why £1M for pensions and only £100k for ISAs? Couldn't be because those making the decisions have fat govt final salary Pensions could it?

Gryff

Dod101 wrote:I think that they would have to leave existing ISAs as they are but put a limit on ISAs currently under the new limit (which would surely be more than £100,000.) I have to say that I am sympathetic to the idea of imposing a limit for an ISA because I have paid very little tax for some years now and that genuinely does not seem very logical.

Dod

So no Council Tax, no VAT on shopping, no Duty tax with extra VAT added on for petrol and booze, no car tax, no VAT on the inflated prices charged during your car servicing...etc?

Steve

PS I did not mention tobacco duty tax cos the moment they all stop smoking, we all pay more tax!


Steve

stevensfo wrote:

Dod101 wrote:I think that they would have to leave existing ISAs as they are but put a limit on ISAs currently under the new limit (which would surely be more than £100,000.) I have to say that I am sympathetic to the idea of imposing a limit for an ISA because I have paid very little tax for some years now and that genuinely does not seem very logical.

So no Council Tax, no VAT on shopping, no Duty tax with extra VAT added on for petrol and booze, no car tax, no VAT on the inflated prices charged during your car servicing...etc?

Also excise duty, stamp duty and air passenger tax. Together those cost me a few grand annually.

Lootman wrote:

stevensfo wrote: So no Council Tax, no VAT on shopping, no Duty tax with extra VAT added on for petrol and booze, no car tax, no VAT on the inflated prices charged during your car servicing...etc?

Also excise duty, stamp duty and air passenger tax. Together those cost me a few grand annually.

Insurance Premium Tax, Stamp Duty (on share purchases etc), Dividend Tax, Capital Gains tax...not to mention all that potential IHT you're accruing.

The government issues the money and, eventually, they get it all back again.

Tedx wrote:The government issues the money and, eventually, they get it all back again.

Or more. Consider the life of a £1 coin: every time it changes hands, the government takes a slice. Maybe just one half of a percent (stamp duty). Or 40% (income tax or IHT). And everything between e.g. VAT at 20%.

Over the life of that coin it is easily possible that the government collects more than £1 in taxes. How about instead a limit on taxes?

stevensfo wrote:

Dod101 wrote:I think that they would have to leave existing ISAs as they are but put a limit on ISAs currently under the new limit (which would surely be more than £100,000.) I have to say that I am sympathetic to the idea of imposing a limit for an ISA because I have paid very little tax for some years now and that genuinely does not seem very logical.

Dod

So no Council Tax, no VAT on shopping, no Duty tax with extra VAT added on for petrol and booze, no car tax, no VAT on the inflated prices charged during your car servicing...etc?

Steve

PS I did not mention tobacco duty tax cos the moment they all stop smoking, we all pay more tax!


Steve

Of course I pay most of these taxes but I pay almost no income tax of any sort. I pay some tax most years for a few unprotected dividends and sometimes some CGT. A friend of mine with a standard of living similar to mine tells me she is just within the higher tax rate so she is paying basic rate income tax plus a bit more. I do not think she feels any great injustice but it really does not make a lot of sense. Her income is from a DB pension some rental income plus the State Pension whereas my income is mostly from dividends from a couple of ISAs and the State Pension. Does not seem to make a lot of sense.

Dod

Dod101 wrote:Does not seem to make a lot of sense.

My wife and I take just over £25,000 in total from our SIPPs, and make up the rest of our spending from ISAs and some unprotected cash and shares, paying no income tax whatsoever.

Might not make much sense, but that's the way the system (currently) works so I'm not going to voluntarily reorganise our affairs to pay more tax.

The personal allowance being frozen means it's reducing in real terms so there may come a time when we have to pay income tax.

And when our state pensions kick in it'll be difficult to get much more out of the SIPPs without paying income tax.

Scott.

gryffron wrote:

Adamski wrote: Arguably we are at the peak of the laffer curve already

That's a familiar argument for those that oppose tax rises. But based on what?
UK takes 33% of GDP in tax. Denmark 49%. EU average 41%. Which would imply we are nowhere near the top of the taxation curve. Not even close.


On the original point, a £100k limit would be very "unfair" for those of us who chose to save for our retirement in ISAs rather than Pensions. Why £1M for pensions and only £100k for ISAs? Couldn't be because those making the decisions have fat govt final salary Pensions could it?

Gryff

No, per the OBR it is now 37.1%, not 33%

https://obr.uk/docs/dlm_uploads/CCS0822 ... SSIBLE.pdf

It has increased a lot in a short period

Lootman wrote:

Tedx wrote:The government alone issues the money and, eventually, they get it all back again.

Or more.

Can't be more can it? The Government issues every £ and, as you say, takes it all back (eventually) through taxation.

There will be lost/destroyed currency as well as forgeries but it's all got to balance to zero (or as close to zero as possible)

swill453 wrote:

Dod101 wrote:Does not seem to make a lot of sense.

My wife and I take just over £25,000 in total from our SIPPs, and make up the rest of our spending from ISAs and some unprotected cash and shares, paying no income tax whatsoever.

Might not make much sense, but that's the way the system (currently) works so I'm not going to voluntarily reorganise our affairs to pay more tax.

The personal allowance being frozen means it's reducing in real terms so there may come a time when we have to pay income tax.

And when our state pensions kick in it'll be difficult to get much more out of the SIPPs without paying income tax.

Scott.

Neither am I going to reorganise my affairs and I do not feel guilty about it but it just does not feel right to me. I take very little from my SIPP and only if I can reclaim the tax deducted by the SIPP manager.

Dod

GeoffF100 wrote:ISA limits look inevitable. It is surprising that uncapped ISAs have survived for as long as they have. I expect Labour will trim them back. £100K is a small ISA on these boards. I would not be surprised to see most of our ISA holdings kicked out into the open, with their capital gains and dividends taxed as income.

Only if the 1m pensioners accept it!

stevensfo wrote:
backlash could result in emotions rising from 'a bit miffed' to 'really cheesed off!'

Steve

"Cheesed off".....not even remotely close. If there is no action group , i'll bloody well form one!

GeoffF100 wrote:

swill453 wrote:The practicalities of reducing everyone's stocks and shares ISA to £100,000 would be difficult. Right now the only way to get anything out of an ISA is to liquidate it and withdraw the cash. Can you imagine the market chaos if all the shares in ISAs over £100,000 were sold on one particular day?

I guess they might come up with a (new) way of transferring to a non-ISA account, but it's not going to be simple.

It would not be particularly difficult, e.g. if your ISA was £1 million on 6 April and the limit was £100K, then 10% of your capital gains, dividends and interest would be tax free for the following tax year. The CGT rules are more complicated than that already.

That sounds particularly daft to me. ISAs, PEPs and TESSAs were all introduced to encourage saving. Now they are suggesting discouraging or even penalising saving. If you start taxing the dividends, then a lot of higher rate tax is going to be raised. Less so for interest unless rates rise to higher levels. How do you set a starting value for capital gains? It would have to be the value on that 6th April.

Better to increase allowances and lower tax rates to reduce what will be a massive impact on many pensioners.

TJH

Adamski wrote:Point these socialist think tanks miss is the only reason I/maybe you started saving into an ISA is because in my old job they closed our FS pension scheme. If we in the private sector had FS schemes like they do in the public sector then we wouldn't need risky stock market savings.

Has the resolution foundation dreamt up ways of taxing public sector pensions, and our hard working public servants? No, it's always private sector workers getting shafted.

MrsF works in the public sector, as did I. We would be massively inconvenienced by an ISA reduction to £100k.

The simple truth is that most people, Private or Public sector, would not be affected. And be honest, had the Pension Freedoms been available when your FS scheme was closed, would you have paid into pensions instead of ISAs? I know I only opened a PEP because I wanted to be able to control my money rather than AVCs that had to go to buy an annuity.

Paul

scrumpyjack wrote:

gryffron wrote: That's a familiar argument for those that oppose tax rises. But based on what?
UK takes 33% of GDP in tax. Denmark 49%. EU average 41%. Which would imply we are nowhere near the top of the taxation curve. Not even close.

No, per the OBR it is now 37.1%, not 33%
https://obr.uk/docs/dlm_uploads/CCS0822 ... SSIBLE.pdf
It has increased a lot in a short period

Ok. Point accepted. My figure came from a generic google search which may well be out of date. But even the current number is still WAY behind all/most of Europe. So arguing we are at the peak of the Laffer curve still looks unlikely.

Or maybe the issue here is that taxation must rise slowly so people can perceive the benefit that they (or others) are receiving for the tax they pay. Rapid increases in taxation will always be resisted/avoided. But once established as "normal", much higher levels are acceptable. i.e. The Laffer curve is not the only issue at play. The curve moves as perceptions change. (??)

Gryff

monabri wrote:

GeoffF100 wrote:ISA limits look inevitable. It is surprising that uncapped ISAs have survived for as long as they have. I expect Labour will trim them back. £100K is a small ISA on these boards. I would not be surprised to see most of our ISA holdings kicked out into the open, with their capital gains and dividends taxed as income.

Only if the 1m pensioners accept it!

Most ISAs are under £100K, and I expect most with ISAs over £100K will be Tory voters anyway. More votes would be lost if they raised the money some other way.

tjh290633 wrote:

GeoffF100 wrote: It would not be particularly difficult, e.g. if your ISA was £1 million on 6 April and the limit was £100K, then 10% of your capital gains, dividends and interest would be tax free for the following tax year. The CGT rules are more complicated than that already.

That sounds particularly daft to me. ISAs, PEPs and TESSAs were all introduced to encourage saving. Now they are suggesting discouraging or even penalising saving. If you start taxing the dividends, then a lot of higher rate tax is going to be raised. Less so for interest unless rates rise to higher levels. How do you set a starting value for capital gains? It would have to be the value on that 6th April.

Better to increase allowances and lower tax rates to reduce what will be a massive impact on many pensioners.

The object of getting us to save has already been achieved. We are rich now, and no longer need an incentive to save. (That is the argument of the paper.) The starting value for capital gains could be the values of the investments when the new regulations come into force, or at the beginning of the tax year after the ISA first topped £100K, whichever was later. (So that the small fish do not have to keep track of base costs.) There is no chance of increased allowances and lower tax rates, even with this government.

gryffron wrote: Ok. Point accepted. My figure came from a generic google search which may well be out of date. But even the current number is still WAY behind all/most of Europe. So arguing we are at the peak of the Laffer curve still looks unlikely.

Just because some other country has a different rate of taxation tells us nothing about where that country is on the Laffer curve.

It is quite possible, if not probable, that other countries, some of which are known for more socialist leanings than the U.K., have tax rates that are detrimental to the amount of tax collected because of the political consequences of reducing the rates.

joey wrote:Just because some other country has a different rate of taxation tells us nothing about where that country is on the Laffer curve.
It is quite possible, if not probable, that other countries, some of which are known for more socialist leanings than the U.K., have tax rates that are detrimental to the amount of tax collected because of the political consequences of reducing the rates.

Strange how they manage to collect so much then?

Everytime tax increases are even vaguely suggested, those against just shout "Laffer Curve! Laffer Curve!". I'm not suggesting the Laffer Curve isn't real. But I repeat my original question - what evidence can you provide that we are anywhere near the peak?

Gryff