Moderator Message:
There has been a suggestion to merge this thread with another one discussing a similar thing, several months ago. That suggestion has merit.
But the other thread was on another board, not the board specifically for ISAs, and in any case this initial post highlights a new development. --MDW1954
There has been a suggestion to merge this thread with another one discussing a similar thing, several months ago. That suggestion has merit.
But the other thread was on another board, not the board specifically for ISAs, and in any case this initial post highlights a new development. --MDW1954
is a There is an interesting short article re proposals for limiting ISAs in the latest (Mar 2023) sharesoc newsletter. The text is below, a screenshot of the article is at: https://imgur.com/HUUjHt6.
Sharesoc is at https://www.sharesoc.org/. (I have no connection with Sharesoc other than as a member)
ShareSoc Informer - Issue 123 (Mar 2023) https://www.sharesoc.org/news/newsletter/ wrote:
Proposals on limiting ISAs
Social policy think-tank the Resolution Foundation has released a report* looking at the government’s policies to encourage household saving. It particularly focuses on ISAs and notes that capping ISAs could raise £1 billion in tax for the Treasury.
The report proposes a cap of £100,000 on ISAs, but it is unclear if that’s a cap on total contributions or a cap on the total value of an ISA. At one point the report suggests that “individuals would need to choose what accounts to withdraw in order to meet the overall £100,000 limit.”; this seems an overly complicated and impractical proposal that wouldn’t easily cope with fluctuations in equity values, for example.
At £20,000 per annum the existing contribution limits for ISAs are very generous and only wealthy individuals can fully utilise them every year. Looked at in isolation, it’s difficult to find genuine reasons why the best-off should be given such large tax incentives.
However, the £1 billion of additional tax that the Resolution Foundation claims would be collected looks insignificant in the context of HMRC’s recent annual summary on tax reliefs. This notes, for example, that the cost of pensions tax relief was an estimated £51.6 billion in the 2021/22 tax-year, split across £26.9 billion of income tax and £24.7 billion of National Insurance. The top 1% of earners pay almost 30% of all income tax, and that increases to 50% when looking at the top 5% of earners. So it’s worthwhile making an effort to make sure that those people stay in the UK and pay their taxes here. That unfortunately appears not to be the case, as the Telegraph recently reported that the “ultra-wealthy are deserting the UK”.
To paraphrase Jean-Baptiste Colbert: Taxation is the art of plucking the goose with a minimum of hissing. That millionaires are fleeing the UK for lower tax jurisdictions is an indication of “hissing”, but it seems unlikely that tinkering with ISA allowances would change that flow of traffic.
Capping the total value of an ISA seems overly complicated, but it would be relatively simple, for example, to reduce the maximum annual contributions to £6,000 (£500 a month) and cap life-time contributions to £100,000. Existing ISA accounts should be grandfathered, but historic contributions would count towards the £100,000 lifetime cap.
I appreciate that these limits are a lot smaller than the current ones but I struggle to justify tax incentives so large that only the super-wealthy can fully utilise them.
(I hope it's OK to include the text here; it's an interesting article, and putting the text here will mean it shows up in text searches. If anyone is unhappy that the text is quoted above/here, I'll be happy to remove the quoted text)
*: The Resolution Foundation report seems to be at https://www.resolutionfoundation.org/publications/isa-isa-baby/.
(Which is forgivable if, as it seems following the link in the OP, that