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thebarns wrote:
However, I’m not sure how this £23K was derived, it could be manipulated any number of ways - is it an average of just those over 65 that hold an Isa or does it somehow capture the total Isa wealth and divide it by all those aged 65 or over, whether they have an ISA or not.
Also, what about the individual that has a number of cash isas or share ISAs with different providers - I very much doubt HMRC, knowing their abject systems, have the data on the ISA wealth of each individual in this country, even more so those who currently are not required to submit tax returns.
You are correct there. I have three share ISAs and one Cash ISA, my wife has one of each. I have one unsheltered account.
The share ISAs date back to the time of PEPs, and mostly resulted from converting savings schemes into PEPs. What was £6,000 in 1993 is rather more today, even though I draw the dividends.
Cutting back ISAs would save money in the next tax year. Money could be saved in the next tax year by cutting public sector pensions in payment, but not by cutting future pensions. That would lose a lot of votes, and likely lead to a lot of strikes.
Cutting back ISAs would save money in the next tax year. Money could be saved in the next tax year by cutting public sector pensions in payment, but not by cutting future pensions. That would lose a lot of votes, and likely lead to a lot of strikes.
Unfortunately Public Sector pensions in payment are a contractual liability so cannot be cut but HMG could introduce a special additional tax on them
Going back to their original purpose: to encourage saving. (Not to enable those with savings to protect such savings and returns from tax).
We are where we are and I have a visceral dislike of legislation which penalises people’s past behaviours and decisions.
I think current ISA holdings should be grandfathered in respect of their current situation (tax free gains and dividends).
Set future maximum contribution limits at, say, 20% of the previous year’s average income AND make the individual maximum contribution 20% of previous year’s tax paid.
Effect: those who are “just” sheltering current assets would no longer be able to do so. Contribution limit for the very well off (high income and tax payers) tied to % of average earnings.
Steveam wrote:Going back to their original purpose: to encourage saving. (Not to enable those with savings to protect such savings and returns from tax).
We are where we are and I have a visceral dislike of legislation which penalises people’s past behaviours and decisions.
I think current ISA holdings should be grandfathered in respect of their current situation (tax free gains and dividends).
Set future maximum contribution limits at, say, 20% of the previous year’s average income AND make the individual maximum contribution 20% of previous year’s tax paid.
Effect: those who are “just” sheltering current assets would no longer be able to do so. Contribution limit for the very well off (high income and tax payers) tied to % of average earnings.
Removing the tax relief on existing ISA holdings and introducing a new ISA appears to be the most practical approach. Average annual income was about £629*52 = £32,708 in 2022:
20% of that would be £6,542. That looks plausible too. Your second condition would be counter-productive if one of the aims is for people to have savings so that they do not fall back on social security. Apart from that, this looks like a very plausible scenario.
Steveam wrote:Going back to their original purpose: to encourage saving. (Not to enable those with savings to protect such savings and returns from tax).
We are where we are and I have a visceral dislike of legislation which penalises people’s past behaviours and decisions.
I think current ISA holdings should be grandfathered in respect of their current situation (tax free gains and dividends).
Set future maximum contribution limits at, say, 20% of the previous year’s average income AND make the individual maximum contribution 20% of previous year’s tax paid.
Effect: those who are “just” sheltering current assets would no longer be able to do so. Contribution limit for the very well off (high income and tax payers) tied to % of average earnings.
Best wishes,
Steve
No way a Labour government will link the contribution amount to either income or tax paid. It’s both complicated and regressive (in the sense that the more you earn the more tax you save). Total non-starter.
I think the most likely outcome is either a significant cut in the amount that can be contributed or a limit on lifetime contributions or both.
I really hope that Starmer’s legal background and sense of caution will steer him away from a retrospective change on the taxation treatment of existing ISA savings.
Another possible tweak… to be eligible for inclusion in any ISA from [2026 onwards], a stock must be either be listed in the U.K. or if a fund, predominantly invested in U.K. listed securities. I’ve always felt it a bit odd that this requirement (which I think may have applied to PEPs?) isn’t in place. I suspect it’s a genuine post Brexit opportunity.
I think that messing with the ISAs retrospectively would be very unpopular and possibly challenged in the courts. Even those without large ISA pots would see the precedent being set and maybe think twice in the future.
As other people have pointed out, those with large ISA holdings are going to be popping their clogs sooner rather than later. Why make everything complicated?
Far better to bring the annual contribution levels down and make it easier and more worthwhile for the youngsters to save. Remember the old KISS principle?
Also the 10p savings stamps bought at POs and paid in when it became a pound? Why not something similar organised by NS&I ?
Or maybe it's all hot air, the well-known policy of scaring people to death over possible future policies, only to present a much watered-down version resulting in a huge sigh of relief that although we're being shafted, it could have been worse!
Steveam wrote:Going back to their original purpose: to encourage saving. (Not to enable those with savings to protect such savings and returns from tax).
We are where we are and I have a visceral dislike of legislation which penalises people’s past behaviours and decisions.
I think current ISA holdings should be grandfathered in respect of their current situation (tax free gains and dividends).
Set future maximum contribution limits at, say, 20% of the previous year’s average income AND make the individual maximum contribution 20% of previous year’s tax paid.
Effect: those who are “just” sheltering current assets would no longer be able to do so. Contribution limit for the very well off (high income and tax payers) tied to % of average earnings.
Best wishes,
Steve
No way a Labour government will link the contribution amount to either income or tax paid. It’s both complicated and regressive (in the sense that the more you earn the more tax you save). Total non-starter.
I think the most likely outcome is either a significant cut in the amount that can be contributed or a limit on lifetime contributions or both.
I really hope that Starmer’s legal background and sense of caution will steer him away from a retrospective change on the taxation treatment of existing ISA savings.
Another possible tweak… to be eligible for inclusion in any ISA from [2026 onwards], a stock must be either be listed in the U.K. or if a fund, predominantly invested in U.K. listed securities. I’ve always felt it a bit odd that this requirement (which I think may have applied to PEPs?) isn’t in place. I suspect it’s a genuine post Brexit opportunity.
He did say average income, not income for the individual. Restricting ISAs to UK shares would not be likely to affect their price. A relatively small amount of additional investment would not affect market efficiency. Other investors would sell. Labour chancellors have been happy to link pension contributions to a percentage of individual earnings.
Spet0789 wrote:Another possible tweak… to be eligible for inclusion in any ISA from [2026 onwards], a stock must be either be listed in the U.K. or if a fund, predominantly invested in U.K. listed securities. I’ve always felt it a bit odd that this requirement (which I think may have applied to PEPs?) isn’t in place. I suspect it’s a genuine post Brexit opportunity.
Yes, originally PEP holdings were limited to UK shares. And the contribution level was lower for funds than for shares.
But if that was reinstated it would make ISAs near useless for me. Would I have to sell my foreign holdings?
Spet0789 wrote:Another possible tweak… to be eligible for inclusion in any ISA from [2026 onwards], a stock must be either be listed in the U.K. or if a fund, predominantly invested in U.K. listed securities. I’ve always felt it a bit odd that this requirement (which I think may have applied to PEPs?) isn’t in place. I suspect it’s a genuine post Brexit opportunity.
Yes, originally PEP holdings were limited to UK shares. And the contribution level was lower for funds than for shares.
But if that was reinstated it would make ISAs near useless for me. Would I have to sell my foreign holdings?
If that change was implemented, you’d have to move them out of the ISA and they’d become taxable going forward. I would expect the government to make the price at which they left the ISA the acquisition price for CGT.
The policy objective would be to frame ISAs as a tool to promote investment in U.K. businesses in return for the tax break (so a large / mid cap complement to VCTs and EIS).
To be clear, I wouldn’t like that either but I can see the logic.
1.5 million folk with >£100k in ISAs...don't the younger generation want to inherit a nice big chunk of money that Grandad/mum has been growing for them away from the Chancellor's mitts?
Anyway...come the day, I'll be buying a train ticket to London and planning for a daily walk on the M25 or a sit down around No10 ( I'm old, I'm tired!) ..anyone fancying a stroll will be free to join me...Wear something yellow ( like a vest).
monabri wrote:1.5 million folk with >£100k in ISAs...don't the younger generation want to inherit a nice big chunk of money that Grandad/mum has been growing for them away from the Chancellor's mitts?
The Chancellor gets 40% of that pot upon death. ISAs are only untaxed as long as you are alive. Sitting duck for IHT.
monabri wrote:1.5 million folk with >£100k in ISAs...don't the younger generation want to inherit a nice big chunk of money that Grandad/mum has been growing for them away from the Chancellor's mitts?
The Chancellor gets 40% of that pot upon death. ISAs are only untaxed as long as you are alive. Sitting duck for IHT.
That is 40% after the allowance of 325GBP or double in the case of a couple.
But isn't there the possible example where you can gift your kids your mansion, which will be tax free if you live another 7 years?
I seem to remember cases where this was done with the proviso that the parents live there for ever.
Lootman wrote:
The Chancellor gets 40% of that pot upon death. ISAs are only untaxed as long as you are alive. Sitting duck for IHT.
That is 40% after the allowance of 325GBP or double in the case of a couple.
But isn't there the possible example where you can gift your kids your mansion, which will be tax free if you live another 7 years?
I seem to remember cases where this was done with the proviso that the parents live there for ever.
Steve
Such a gift would fail for IHT purposes due to the Reservation of benefit rules.
The only way to do it would be for the parents to pay the kids a market rent, on which the kids would pay tax. Two cousins of mine did that with the mother's London house. Bear in mind that any subsequent rise in the value of the house would be taxable for the kids as it would not qualify for PRR.
Spet0789 wrote:The policy objective would be to frame ISAs as a tool to promote investment in U.K. businesses in return for the tax break (so a large / mid cap complement to VCTs and EIS).
With VCT and EIS you are investing in companies that mostly would not otherwise attract investment. FTSE 350 companies do not have trouble attracting investment unless they are in trouble. The FTSE 100 gets 70% of its earnings from overseas. Restricting us the UK listed companies just reduces our spread of risk. It is not good to have your investments tank when your country goes down the tubes.
Last edited by GeoffF100 on January 18th, 2023, 3:17 pm, edited 1 time in total.
Spet0789 wrote:Another possible tweak… to be eligible for inclusion in any ISA from [2026 onwards], a stock must be either be listed in the U.K. or if a fund, predominantly invested in U.K. listed securities. I’ve always felt it a bit odd that this requirement (which I think may have applied to PEPs?) isn’t in place. I suspect it’s a genuine post Brexit opportunity.
Yes, originally PEP holdings were limited to UK shares. And the contribution level was lower for funds than for shares.
But if that was reinstated it would make ISAs near useless for me. Would I have to sell my foreign holdings?
Yes, of course, but that is not what the Resolution Foundation is proposing. They are proposing that ISAs be limited to £100K.
Spet0789 wrote:The policy objective would be to frame ISAs as a tool to promote investment in U.K. businesses in return for the tax break (so a large / mid cap complement to VCTs and EIS).
With VCT and EIS you are investing in companies that mostly would not otherwise attract investment. FTSE 350 companies do not have trouble attracting investment unless they are in trouble. The FTSE 100 gets 70% of its earnings from overseas. Restricting us the UK listed companies just reduces our spread of risk. It is not good to have your investments tank when your country goes down the tubes.
The government is keen to drive more U.K. capital into the U.K. market - you see this with their attempts to alter insurance and pension regulation. I agree it’s bad for savers as it restricts their choices but I can see it happening as a quid pro quo for the tax relief.
Since Brexit, many international investors have shied away from U.K. investments, and many of the prominent Brexit apologists on these boards seem to prefer investing elsewhere than the U.K.
GeoffF100 wrote:
With VCT and EIS you are investing in companies that mostly would not otherwise attract investment. FTSE 350 companies do not have trouble attracting investment unless they are in trouble. The FTSE 100 gets 70% of its earnings from overseas. Restricting us the UK listed companies just reduces our spread of risk. It is not good to have your investments tank when your country goes down the tubes.
The government is keen to drive more U.K. capital into the U.K. market - you see this with their attempts to alter insurance and pension regulation. I agree it’s bad for savers as it restricts their choices but I can see it happening as a quid pro quo for the tax relief.
Since Brexit, many international investors have shied away from U.K. investments, and many of the prominent Brexit apologists on these boards seem to prefer investing elsewhere than the U.K.
It would not drive more UK capital into the UK market, unless the companies make rights issues. It would increase UK ownership of UK companies, but where is the benefit in that? Their attempts to change insurance and pension regulation are aimed at raising money for new long term UK investment, as I understand it.
Spet0789 wrote:
The government is keen to drive more U.K. capital into the U.K. market - you see this with their attempts to alter insurance and pension regulation. I agree it’s bad for savers as it restricts their choices but I can see it happening as a quid pro quo for the tax relief.
Since Brexit, many international investors have shied away from U.K. investments, and many of the prominent Brexit apologists on these boards seem to prefer investing elsewhere than the U.K.
It would not drive more UK capital into the UK market, unless the companies make rights issues. It would increase UK ownership of UK companies, but where is the benefit in that? Their attempts to change insurance and pension regulation are aimed at raising money for new long term UK investment, as I understand it.
Fair point but the argument is always made (as it was made for PEPs) that promoting share ownership of mature companies ‘draws capital in’ to the domestic IPO market. Basically if the valuation of mature U.K. companies is higher, it becomes easier to IPO companies here.
