The Lemon Fool

What's the betting Rishi will see ISAs as an easy target?

Bouleversee wrote:What's the betting Rishi will see ISAs as an easy target?

I think that it is extremely unlikely he will touch them.

According to published statistics, there are only 46,000 higher rate taxpayers with ISAs worth over £150,000

https://assets.publishing.service.gov.u ... e_2020.pdf

So the amount of tax he could raise would be trivial and he would outrage his own MPs. In any case it suits HMG to encourage people to hang onto their large ISAs until they die and so pay 40% IHT on them.

He has not touched IHT or CGT in spite of the suggestions of the Office for Tax Simplification, so I really can't see why he would bother stirring things up by messing about with ISAs.

DelianLeague wrote:Some more info from ii,

It only mentions ISA's, not PEP's.

All PEPs became ISAs on 6th April 2008, at which point they could be amalgamated. That is what I did.

TJH

tjh290633 wrote:

DelianLeague wrote:This is according to ii (14th Feb):

Some 983 ISA millionaires are with interactive investor, the UK’s second largest DIY investment platform, data published today reveals.

This is up from 731 last year* and is nearly half of the total ISA millionaires in the UK, according to the latest data from HMRC, obtained by InvestingReviews.co.uk.

I was surprised at the amount but I suppose they have been around a while now.

D.L.

If you go back to when PEPs started and invested the maximum permitted in PEPs, then ISAs, a single person could have invested about £355,000 making use of all the opportunities available, including PEPs, Single Company PEPs and ISAs. From my own records, that could have increased by over 600% to date, the actual figure depending on which investments were chosen. That would be well over £2million. Interactive Investor may well have benefitted from taking on the clients of Aliance Trust Savings and other ISA managers. I am surprised that they have such a high proportion of ISA millionaires.

TJH

There were 60 as of Jan 2022 https://www.fool.co.uk/2022/01/20/revea ... lionaires/ with £3M+ (average of £6.2M, so some of those have >£6.2M). I suspect that's a result of partial filling of their ISA by draining/migrating SIPP (tax credits on the way in (SIPP), no tax on the way out (ISA)). US example (click the 'Assets' tab and the last bar chart ... SDS (2x short) in SIPP, SSO (2x long) in ISA). So yearly ISA 20K, plus what is added into SIPP - that with a appropriate asset allocation tends to migrate SIPP into ISA.

scrumpyjack wrote:He has not touched IHT or CGT in spite of the suggestions of the Office for Tax Simplification, so I really can't see why he would bother stirring things up by messing about with ISAs.

Annual exempt limits on CGT are being reduced, which will make it more difficult to finance a transfer from taxable assets to ISAs using the £ 20,000 allowed contribution without paying CGT. The method is to sell assets, transfer to the ISA and rebuy. "Bed and ISA" is the method if doing it in the same tax year. Some prefer to sell at the end of an old tax year, hold cash over the tax year end and transfer in the new tax year. That's where you are concerned about potential forced disposals from mergers and takeovers.

scrumpyjack wrote:

Bouleversee wrote:What's the betting Rishi will see ISAs as an easy target?

I think that it is extremely unlikely he will touch them.

According to published statistics, there are only 46,000 higher rate taxpayers with ISAs worth over £150,000

https://assets.publishing.service.gov.u ... e_2020.pdf

So the amount of tax he could raise would be trivial and he would outrage his own MPs. In any case it suits HMG to encourage people to hang onto their large ISAs until they die and so pay 40% IHT on them.

He has not touched IHT or CGT in spite of the suggestions of the Office for Tax Simplification, so I really can't see why he would bother stirring things up by messing about with ISAs.

And Rishi has not been Chancellor for sometime anyway.

Dod

My ISAs are currently at £400k. My pension is already at £1 million.

Investing in PEPs since 1997. Then Self Select ISAs once they were available. The pension has been active since 1988.
The other difference being I left the pension alone with the default investments, on maximum matched contributions and my annual bonuses paid in.
I chose HYP shares for the ISA and did use some of it to pay off my mortgage in 2009.

Perhaps that was a mistake but the ISA was always a secondary investment for anything left over after making maximum matched contributions to the pension.

I'll be starting to take the pension in 2 years. Probably the 25% tax-free lump sum will be used to gradually top up the ISA.

pkparks wrote:I'll be starting to take the pension in 2 years. Probably the 25% tax-free lump sum will be used to gradually top up the ISA.

If you don't have any other income, don't forget you can withdraw the £12,570 personal allowance tax free as well.

Scott.

pkparks wrote: the ISA was always a secondary investment for anything left over after making maximum matched contributions to the pension.

I always did the opposite - max out the ISA and then fund a pension.

I always figured taxes would be higher in the future.

Lootman wrote:

pkparks wrote: the ISA was always a secondary investment for anything left over after making maximum matched contributions to the pension.

I always did the opposite - max out the ISA and then fund a pension.

I always figured taxes would be higher in the future.

General taxes may have gone up a bit but pensions now have a 25% tax free withdrawal element. I'd question your choice.

When discussing the respective benefits of pensions and ISAs is the correct treatment of the 25% to consider it ONLY on the tax arbitrage, not the full amount, however tempting that may be.

The first 100k or so is a decent blag. Take out 25% and make up the delta between the SP and the personal allowance - good deal.
Then there is a substantial grey area where you are likely to be in 20% income tax territory either way unless you take early retirement so the 25% is just 5% really - meh.
Then the real cream is the high rate tax arbitrage down to basic rate, or likely that you are wealthy enough to retire early so an add the personal allowance in as well for a few years.

Inheriting lumps in the same sort of time frame distorts this a treat, clearly.
My impression is that personal circumstances are very influential.
I will never leave the grey area, with a possible inheritance lurking in the background and I am very aware that there is no simple answer. Being wealthy looks easier.

W.

MrFoolish wrote:
General taxes may have gone up a bit but pensions now have a 25% tax free withdrawal element. I'd question your choice.

Not any more. If you are a higher (40%) earner/saver with a larger pot, you might want to check the small print...

moorfield wrote:

MrFoolish wrote:
General taxes may have gone up a bit but pensions now have a 25% tax free withdrawal element. I'd question your choice.

Not any more. If you are a higher (40%) earner/saver with a larger pot, you might want to check the small print...

Can you elaborate please? I'm not sure what you are referring to.

moorfield wrote:

MrFoolish wrote:General taxes may have gone up a bit but pensions now have a 25% tax free withdrawal element. I'd question your choice.

Not any more. If you are a higher (40%) earner/saver with a larger pot, you might want to check the small print...

In any event, we have had this ISA versus SIPP debate a few times, and the answer is always "it depends". And part of what it depends on is personal. For me it is the flexibility and mobility of an ISA.

joey wrote:

MrFoolish wrote:
Can you elaborate please? I'm not sure what you are referring to.

25% withdrawal is capped at the old LTA limit. So a maximum of c.250k available as a TFLS.

Not if you have 'protections' (enhanced, fixed etc etc). In that case the limit is 25% of your protected LTA or unlimited in the case of enhanced protection.