toffeeboy
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Post by toffeeboy on Sept 9, 2024 9:33:01 GMT
Surely you limit the total amount you can pay into ISA's in a lifetime not the value of ISA you can have in the same way you can only pay £20k in each year not your ISA balance can only increase by £20k each year.
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Post by Ace on Sept 9, 2024 9:44:16 GMT
Surely you limit the total amount you can pay into ISA's in a lifetime not the value of ISA you can have in the same way you can only pay £20k in each year not your ISA balance can only increase by £20k each year. That would be the obvious sensible and practical way of doing it, but it isn't the one being recommended in the Resolution Foundation's report, which was the root of the article that triggered the discussion.
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theta
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Post by theta on Sept 18, 2024 7:50:50 GMT
Surely you limit the total amount you can pay into ISA's in a lifetime not the value of ISA you can have in the same way you can only pay £20k in each year not your ISA balance can only increase by £20k each year. That would be the obvious sensible and practical way of doing it, but it isn't the one being recommended in the Resolution Foundation's report, which was the root of the article that triggered the discussion. The report goes into extreme detail complaining about the uneven distribution of ISA accounts and has only this one sentence as a recommendation:
A simpler
approach would be to cap the total value an individual is allowed to hold across any ISAs
– and when this cap is hit, either as a result of active saving into an ISA or as a result of
savings income or capital gains, then an individual would no longer be able to add money
to any ISA account.
Taken literally it means that existing large ISAs would not be subject to taxation or be forced to be closed/withdrawn, but just that they can't be topped up anymore. This however is at odds with the footnote referring to this specific sentence:
Applying this retroactively creates a challenge for those with more than one ISA account. One approach, and the one we assume
for the following policy costing, is that individuals would need to choose what accounts to withdraw in order to meet the overall
£100,000 limit. It would be needed to phase this requirement in over time given some ISA products have contractual restrictions on
withdrawing finances immediately. There could also be legal challenges with a retroactive approach but that is beyond the scope
of this paper and there are many examples of previous retrospective changes (e.g. cutting the lifetime pensions cap).
The footnote mentions "withdraw", which is not mentioned or implied in the previous sentence (that the footnote refers to), unless they mean withdraw from an ISA to bring the balance below £100k so that you can top up again, but why would anyone do that instead of simply leaving the ISA as is and skip the extra steps? Overall this recommendation doesn't seem to be thought through and I'm surprised at the level of attention it has received. I feel that it's spread on purpose in order to manage expectations (make people expecting the absolute worst) so that the actual budget announcement looks reasonable in comparison.
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pikestaff
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Post by pikestaff on Sept 20, 2024 7:53:15 GMT
...The simplest solution would be to lower the annual contribution limit going forward. I'd find lowering the annual contribution limit from £20k to £10k hard to argue against. ... Or even £5k. Not that I'm advocating that, and at a personal level would not want it. But it is difficult to argue against it, frankly. Its an "middle/upper class" tax break and very difficult to make a cogent argument otherwise. As of January 2024, a survey from Finder has revealed that the average UK adult has £11,185 in savings. Despite this about 46% of people have £1000 or less in savings and 25% have £200 or less.So even £10k annual limit is considerably above what the majority of people are going to be able to benefit from. Of course, one can make an argument that NO savings income should be subject to tax. But once one accepts the principle (even if through necessity) of taxing savings then ISAs are clearly "just" a mechanism for the wealthier in society to reduce their tax bills. Agreed. But there's another thing that's worrying me, which I've not seen mentioned anywhere. The record keeping requirements for capital gains tax, and the detail demanded by HMRC with the tax return, make it really difficult to hold significant amounts of stocks and shares (other than CGT exempt ones like VCTs) outside of an ISA - especially with the recent reductions in the annual exemption. I don't, and I can't imagine ever doing so.
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Post by bracknellboy on Sept 20, 2024 9:48:32 GMT
Or even £5k. Not that I'm advocating that, and at a personal level would not want it. But it is difficult to argue against it, frankly. Its an "middle/upper class" tax break and very difficult to make a cogent argument otherwise. As of January 2024, a survey from Finder has revealed that the average UK adult has £11,185 in savings. Despite this about 46% of people have £1000 or less in savings and 25% have £200 or less.So even £10k annual limit is considerably above what the majority of people are going to be able to benefit from. Of course, one can make an argument that NO savings income should be subject to tax. But once one accepts the principle (even if through necessity) of taxing savings then ISAs are clearly "just" a mechanism for the wealthier in society to reduce their tax bills. Agreed. But there's another thing that's worrying me, which I've not seen mentioned anywhere. The record keeping requirements for capital gains tax, and the detail demanded by HMRC with the tax return, make it really difficult to hold significant amounts of stocks and shares (other than CGT exempt ones like VCTs) outside of an ISA - especially with the recent reductions in the annual exemption. I don't, and I can't imagine ever doing so.Ah, that is interesting. Until recently I have not held much in S&S outside of pension or ISAs. Part of my concern had been not knowing what was required / couldn't be bothered with worrying about the requirements. However I started to change that a while back as I was undoubtedly too cash heavy. So what requirements are there ? I had kind of hoped that the platforms would be able to provide the necessary information when the time came. But sounds like that I might have been a tad optimistic on that score.
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james100
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Post by james100 on Sept 20, 2024 11:24:51 GMT
Or even £5k. Not that I'm advocating that, and at a personal level would not want it. But it is difficult to argue against it, frankly. Its an "middle/upper class" tax break and very difficult to make a cogent argument otherwise. As of January 2024, a survey from Finder has revealed that the average UK adult has £11,185 in savings. Despite this about 46% of people have £1000 or less in savings and 25% have £200 or less.So even £10k annual limit is considerably above what the majority of people are going to be able to benefit from. Of course, one can make an argument that NO savings income should be subject to tax. But once one accepts the principle (even if through necessity) of taxing savings then ISAs are clearly "just" a mechanism for the wealthier in society to reduce their tax bills. Agreed. But there's another thing that's worrying me, which I've not seen mentioned anywhere. The record keeping requirements for capital gains tax, and the detail demanded by HMRC with the tax return, make it really difficult to hold significant amounts of stocks and shares (other than CGT exempt ones like VCTs) outside of an ISA - especially with the recent reductions in the annual exemption. I don't, and I can't imagine ever doing so. Wise words, close to my heart given this is tax return weekend for me. UK tax literacy already feels low, HMRC fails to meet required support levels through phone or the 'community forum' and their powers of investigation are eye-watering. An absolute ISA limit would require either forced exit with cost rebase into a GIA or forced liquidation inside the wrapper then optional repurchase in GIA followed by recording requirements and filing on over what is now a miniscule CGT allowance. Sure, there's disparity but savings are also massively skewed to older age due to natural income progression v reduction in transient expenditure with the 'last' financial goal being retirement. Anything that screws with the risk/reward balance, hassle factor or sense of system stability for people saving today to fund their future selves living costs without state reliance should be left well alone IMO. Here, tax advantages are pretty self-selecting on highest net contributors who've already been taxed once at a high gross rate anyway (income, NICs, council tax...) so I have zero issue with that. Side thought: British Overseas Territories - BVI in particular - is still the globally preferred jurisdiction for dirty money generated through massive tax evasion and criminal activity. I think about this every time I hear that UK taxes need to be raised or allowances diminished, and it will never stop annoying me.
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eeyore
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Post by eeyore on Sept 20, 2024 11:31:22 GMT
Agreed. But there's another thing that's worrying me, which I've not seen mentioned anywhere. The record keeping requirements for capital gains tax, and the detail demanded by HMRC with the tax return, make it really difficult to hold significant amounts of stocks and shares (other than CGT exempt ones like VCTs) outside of an ISA - especially with the recent reductions in the annual exemption. I don't, and I can't imagine ever doing so.Ah, that is interesting. Until recently I have not held much in S&S outside of pension or ISAs. Part of my concern had been not knowing what was required / couldn't be bothered with worrying about the requirements. However I started to change that a while back as I was undoubtedly too cash heavy. So what requirements are there ? I had kind of hoped that the platforms would be able to provide the necessary information when the time came. But sounds like that I might have been a tad optimistic on that score. It's not "difficult" but it's "arduous" - basically, keeping precise details of what has been bought & sold and when, together with income (dividends) received. Just like keeping track of P2P investments outside an ISA! The annual tax return will have a question asking if you have exceeded the annual threshold on any capital gains. If below the threshold, there's nothing to do other than to say "No". Only if your gains have exceeded the losses by the level of the threshold do you need to submit any figures. I've have S&S investments outside an ISA for forty years but my gains in any one tax-year have never gone over the threshold - it's simple enough to keep track of disposals during the year to ensure any gains don't exceed the threshold. But with the recent sharp reduction in the threshold, a lot more people will be facing this problem which is why for any investment which can be bought & sold it's essential that records are kept just in case, in some future year, the records of a transaction to purchase something maybe years earlier might be required. After all, it's not impossible that the CGT threshold might be reduced to zero! For the details of what HMRC require, I suggest looking at MSE's forum on tax - CGT is a popular topic and there are some expert and helpful posters: forums.moneysavingexpert.com/categories/cutting-tax
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Post by Harland Kearney on Sept 20, 2024 12:31:52 GMT
Part of me believes that the reason we are seeing this scare mongering *cap* is to prepare for a tough budget. But if we have in mind that a 100k cap might be introduced! when its shown its not & is instead higher CGT or reduction of reliefs on pensions; we will sigh & say its not so bad!
Despite savers/investors getting shafted in the grand scheme of things.
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jonno
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nil satis nisi optimum
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Post by jonno on Sept 20, 2024 13:05:24 GMT
Part of me believes that the reason we are seeing this scare mongering *cap* is to prepare for a tough budget. But if we have in mind that a 100k cap might be introduced! when its shown its not & is instead higher CGT or reduction of reliefs on pensions; we will sigh & say its not so bad!
Despite savers/investors getting shafted in the grand scheme of things. Look guys. I've got it from a reliable No 10 source that the Chancellor avidly monitors this forum; stop giving her ideas.
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Post by bracknellboy on Sept 20, 2024 13:35:39 GMT
Ah, that is interesting. Until recently I have not held much in S&S outside of pension or ISAs. Part of my concern had been not knowing what was required / couldn't be bothered with worrying about the requirements. However I started to change that a while back as I was undoubtedly too cash heavy. So what requirements are there ? I had kind of hoped that the platforms would be able to provide the necessary information when the time came. But sounds like that I might have been a tad optimistic on that score. It's not "difficult" but it's "arduous" - basically, keeping precise details of what has been bought & sold and when, together with income (dividends) received. Just like keeping track of P2P investments outside an ISA! The annual tax return will have a question asking if you have exceeded the annual threshold on any capital gains. If below the threshold, there's nothing to do other than to say "No". Only if your gains have exceeded the losses by the level of the threshold do you need to submit any figures. I've have S&S investments outside an ISA for forty years but my gains in any one tax-year have never gone over the threshold - it's simple enough to keep track of disposals during the year to ensure any gains don't exceed the threshold. But with the recent sharp reduction in the threshold, a lot more people will be facing this problem which is why for any investment which can be bought & sold it's essential that records are kept just in case, in some future year, the records of a transaction to purchase something maybe years earlier might be required. After all, it's not impossible that the CGT threshold might be reduced to zero! For the details of what HMRC require, I suggest looking at MSE's forum on tax - CGT is a popular topic and there are some expert and helpful posters: forums.moneysavingexpert.com/categories/cutting-taxMy investment in shares is predominantly in tracking funds. Purchases made over extended period of time. So future sales will be of part of those funds. That in my way of thinking makes life both potentially 'complex' (what was the cost of purchase when you have actually brought units over an extended period), and on the other hand could be relatively simple if the platform essentially gives you the assumed buy (and of course sell) price.
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dh1
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Post by dh1 on Sept 20, 2024 14:53:00 GMT
I've long admired the penchant for Governments and others to find the most complicated solution to problems. I find that Occam's Razor is a great guide here. So, if Government wants to have a go at ISA's all it needs to do is say that in the next Tax Year there is no ISA (probably save for existing - ie previous Tax Year - ISAs).
A result of such a move would probably, assuming that the Gilts CGT loophole (if it is that) isn't closed, a stampede for Gilts which may also help Government...
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james100
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Post by james100 on Sept 20, 2024 15:34:05 GMT
It's not "difficult" but it's "arduous" - basically, keeping precise details of what has been bought & sold and when, together with income (dividends) received. Just like keeping track of P2P investments outside an ISA! The annual tax return will have a question asking if you have exceeded the annual threshold on any capital gains. If below the threshold, there's nothing to do other than to say "No". Only if your gains have exceeded the losses by the level of the threshold do you need to submit any figures. I've have S&S investments outside an ISA for forty years but my gains in any one tax-year have never gone over the threshold - it's simple enough to keep track of disposals during the year to ensure any gains don't exceed the threshold. But with the recent sharp reduction in the threshold, a lot more people will be facing this problem which is why for any investment which can be bought & sold it's essential that records are kept just in case, in some future year, the records of a transaction to purchase something maybe years earlier might be required. After all, it's not impossible that the CGT threshold might be reduced to zero! For the details of what HMRC require, I suggest looking at MSE's forum on tax - CGT is a popular topic and there are some expert and helpful posters: forums.moneysavingexpert.com/categories/cutting-taxMy investment in shares is predominantly in tracking funds. Purchases made over extended period of time. So future sales will be of part of those funds. That in my way of thinking makes life both potentially 'complex' (what was the cost of purchase when you have actually brought units over an extended period), and on the other hand could be relatively simple if the platform essentially gives you the assumed buy (and of course sell) price. You do it via section 104 holding - actual contract notes best for this (not platform calcs) and it's good practice to send in a computational worksheet of annual activity with return as HMRC online system doesn't have fields for all the info they are interested in. 2 reporting thresholds are 1) net gain vs cgt allowance, and 2) annual disposable proceeds limit (across all transactions inc zero gains & losses). Complexity can vary with asset type / timing but that's the crux of it.
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pikestaff
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Post by pikestaff on Sept 20, 2024 17:36:09 GMT
Ah, that is interesting. Until recently I have not held much in S&S outside of pension or ISAs. Part of my concern had been not knowing what was required / couldn't be bothered with worrying about the requirements. However I started to change that a while back as I was undoubtedly too cash heavy. So what requirements are there ? I had kind of hoped that the platforms would be able to provide the necessary information when the time came. But sounds like that I might have been a tad optimistic on that score. It's not "difficult" but it's "arduous" - basically, keeping precise details of what has been bought & sold and when, together with income (dividends) received. Just like keeping track of P2P investments outside an ISA! The annual tax return will have a question asking if you have exceeded the annual threshold on any capital gains. If below the threshold, there's nothing to do other than to say "No". Only if your gains have exceeded the losses by the level of the threshold do you need to submit any figures. I've have S&S investments outside an ISA for forty years but my gains in any one tax-year have never gone over the threshold - it's simple enough to keep track of disposals during the year to ensure any gains don't exceed the threshold. But with the recent sharp reduction in the threshold, a lot more people will be facing this problem which is why for any investment which can be bought & sold it's essential that records are kept just in case, in some future year, the records of a transaction to purchase something maybe years earlier might be required. After all, it's not impossible that the CGT threshold might be reduced to zero! For the details of what HMRC require, I suggest looking at MSE's forum on tax - CGT is a popular topic and there are some expert and helpful posters: forums.moneysavingexpert.com/categories/cutting-taxNot so. For the 2023/24 tax year you must complete the capital gains pages if (among other things) either: - you sold or disposed of chargeable assets which were worth more than £50,000 [regardless of any gains or losses] or
- your chargeable gains before taking off any losses [emphasis added, james100 please note] were more than £6,000.
You must then provide HMRC with a calculation of the gain or loss for each disposal and add them up for the tax return. I've had to do this both for my late mother and for a trust that I was the trustee of. It's a lot of work - even with a spreadsheet. And yes, you do need the contract notes if you want to get it right. Here is a link to the current guidance notes: assets.publishing.service.gov.uk/media/660bbb5e91a3206e4382b06b/SA108_Notes_2024.pdfThe first set of bullets is also in the main self assessment guidance notes. Here is a link to the current paper version of the CGT return: assets.publishing.service.gov.uk/media/660bbb40f9ab417b75eea375/sa108_2024.pdf
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pikestaff
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Post by pikestaff on Sept 20, 2024 17:54:06 GMT
One other thing. There's been some chatter suggesting they might align CGT rates with income tax rates. I've seen somebody suggest that if they do that they should bring in an indexation allowance so that you only pay tax on the increase in the real value of assets. If this were to happen it would make the job significantly harder, and borderline impossible without a spreadsheet. I know because I had to do CGT with indexation allowance when I did my accountancy exams many years ago.  |
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james100
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Post by james100 on Sept 20, 2024 19:30:13 GMT
Not so. For the 2023/24 tax year you must complete the capital gains pages if (among other things) either: - you sold or disposed of chargeable assets which were worth more than £50,000 [regardless of any gains or losses] or
- your chargeable gains before taking off any losses [emphasis added, james100 please note] were more than £6,000.
You must then provide HMRC with a calculation of the gain or loss for each disposal and add them up for the tax return. I've had to do this both for my late mother and for a trust that I was the trustee of. It's a lot of work - even with a spreadsheet. And yes, you do need the contract notes if you want to get it right. Here is a link to the current guidance notes: assets.publishing.service.gov.uk/media/660bbb5e91a3206e4382b06b/SA108_Notes_2024.pdfThe first set of bullets is also in the main self assessment guidance notes. Here is a link to the current paper version of the CGT return: assets.publishing.service.gov.uk/media/660bbb40f9ab417b75eea375/sa108_2024.pdfQuite right on your note re my previous comment. My poor choice of words was thinking sum of gains minus allowable expenditure. Anyway, I have to report to HMRC this year as usual and it's a PITA. Good to link the current notes too - the HMRC website was many (10?) months late in updating the reportable disposal limit when it changed from the old x 4 limit. I would be in favour of bringing indexation back but I do take your point on admin. Maybe a practical middle ground would be Aussie rules whereby CGT % = income tax % BUT assets held for >12 months get a 50% reduction on the net gain.
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