The Lemon Fool

Lootman wrote:

Bouleversee wrote:Depending on the day/week I check, my ISAs are around 7 figures, too, but I am conscious of the fact that they will be subject to 40% tax when I pop my clogs which may not be too far hence.

Same here. I was very briefly above a million but shy of it now with the recent market falls.

Still, even if you project a modest 4% ("safe" SWR?) rate of return, that is 40K a year tax free. Will take it.

But as you note, the income tax and CGT saved pales into insignificance compared with the potential 40% hit to the entire value. And so do I give thought to at what point in my life I give up the ISA benefits in favour of being in a position to mitigate IHT - something that is dificult to do with an ISA?

Could this have been the government's cunning plan all along?

Of course one possible way of ameliorating IHT on an ISA is to borrow personally, if you can arrange it at an attractive interest rate, give the cash borrowed to your offspring, and live 7 years. OK the interest on the borrowings is not tax deductible but the ISA income isn't taxed so in one's mind one can offset the other. Then when you die the borrowings are a deduction from your estate offsetting to some extent the value of the ISA. Hopefully over those 7 years the ISA will have increased in value. Of course one might not be happy to borrow when aged (I would not), but if you are serious about reducing IHT but keeping the benefit of the ISA.....

everhopeful wrote:I recognise that it does not apply to some of the posters above but it is worth remembering that under the present rules an ISA can be transferred to a spouse free of IHT by increasing the value of the spouse's ISA when the holder dies.

Conflation is a word often used on these Boards. I think you are conflating two issues. Transferring the right to take over the ISA allowance of a spouse on death is one thing; whether assets in the ISA or otherwise are free of IHT or not, quite another.

Dod

Yes, I think Dod is correct.
Incidentally, I think it is possible to have the shares themselves transferred on death to one’s spouse’s ISA (rather than having to sell them and transfer the cash), certainly if the deceased and the spouse share the same ISA provider.

It certainly is possible to transfer one's ISA shares in specie without IHT to spouse's ISA even if both are not with the same provider. I had what was left of my husband's ISA after sufficient shares had been sold to satisfy his bequest to our children which equated to the IHT free allowance as his will had been made a long time ago before it could be c/f to the 2nd death. This means of course that there will be masses of IHT to pay on the second death especially as one loses the residents nil rate band on estates over £2m, I believe, which can easily happen after house price increases and no corresponding increase in allowances. The 7 year rule makes life/death even more of a lottery. There comes a point when there is absolutely no point in saving. Pity it has been so difficult to spend since Covid hit.

Dod is correct and I was guilty of both conflation and a lack of clarity. What I was trying to convey is that when I die my wife can have the value of my ISA transferred to her and will retain all the benefits associated with an ISA. I was making the point that when comparing the relative merits of ISAs and pensions this is worth baring in mind. Subsequent income from or capital withdrawals from the ISA are free of tax whereas with a pension any withdrawals would be subject to her marginal tax rate. Of course on her death the assets within the ISA become subject to IHT.

everhopeful wrote:Subsequent income from or capital withdrawals from the ISA are free of tax whereas with a pension any withdrawals would be subject to her marginal tax rate.

Depends on age and type of pension. If the deceased is less than 75 and the pension is Defined Contribution (a SIPP, for example) then the entire amount can be passed to beneficiaries (including, but not limited to, a spouse) free of any tax.

Scott.

Bouleversee wrote: This means of course that there will be masses of IHT to pay on the second death especially as one loses the residents nil rate band on estates over £2m, I believe, which can easily happen after house price increases and no corresponding increase in allowances. The 7 year rule makes life/death even more of a lottery. There comes a point when there is absolutely no point in saving. Pity it has been so difficult to spend since Covid hit.

You are correct there, Lorna. I have been finding things to spend on the house and elsewhere. It doesn't take much for rises in portfolio and property values to take one over the limit.

TJH

re the ISA on death, note that even if the deceased left nothing to the spouse in their Will, the spouse can move an amount up to the value of the deceased's ISA into their ISA. So he/she can sell investments not held in an ISA and pay the cash into their ISA, irrespective of the terms of the Will.

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.

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

tjh290633 wrote: 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.

It should not be that surprising that folks with a 7-figure USA choose ii as the provider for their ISA. ii has a flat fee charge for accounts and so, for very large accounts, the percentage fee is trivial. And it can mostly be reduced to just two quid a month if there is one trade per month.

And if you also have a taxable account with ii then the ISA is effectively free, as the fee is per investor rather than per account (SIPPs aside).

Lootman wrote:It should not be that surprising that folks with a 7-figure USA choose ii as the provider for their ISA. ii has a flat fee charge for accounts and so, for very large accounts, the percentage fee is trivial. And it can mostly be reduced to just two quid a month if there is one trade per month.

If you don't trade then at AJ Bell it'd be just £3.50 per month.

Scott.

swill453 wrote:

Lootman wrote:It should not be that surprising that folks with a 7-figure USA choose ii as the provider for their ISA. ii has a flat fee charge for accounts and so, for very large accounts, the percentage fee is trivial. And it can mostly be reduced to just two quid a month if there is one trade per month.

If you don't trade then at AJ Bell it'd be just £3.50 per month.

Scott.

I'm with Lloyd's and pay £40 per year, or £3.33 per month.

TJH

tjh290633 wrote:

swill453 wrote:

Lootman wrote:It should not be that surprising that folks with a 7-figure SA choose ii as the provider for their ISA. ii has a flat fee charge for accounts and so, for very large accounts, the percentage fee is trivial. And it can mostly be reduced to just two quid a month if there is one trade per month.

If you don't trade then at AJ Bell it'd be just £3.50 per month.

I'm with Lloyd's and pay £40 per year, or £3.33 per month.

But again, is that charge per account? The beauty of the ii charging structure is that it is just one monthly fee no matter how many non-SIPP accounts you have.

So in my case the charge comes to £2 a month total, for both my taxable and non-taxable accounts.

And you can take your "free" monthly trade from either account, although it is deducted from the taxable account. That is about 0.0016% of the value of my two accounts!

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.

Oddly enough I am not surprised by this at all. I'm not there myself yet but I only started in about 2013.

Gostevie

Gostevie 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.

Oddly enough I am not surprised by this at all. I'm not there myself yet but I only started in about 2013.

Gostevie

Wouldn't some investors have thier ISAs split between a couple of providers? I know I and others posting on here do.
Might there be even more M'ISAaires - or perhaps the HMRC accounted for that?

kempiejon wrote:Wouldn't some investors have thier ISAs split between a couple of providers? I know I and others posting on here do.
Might there be even more M'ISAaires - or perhaps the HMRC accounted for that?

I am curious why HMRC bothers to try and compile this data, given that there are no tax issues involved. I imagine that the taxman has an interest in subscriptions, to ensure that people stick to the annual limits for new money. But the total value within an ISA has no tax effect, at least until death when inheritance tax may be relevant.

Perhaps the government likes to keep track of how much income and capital gains tax it is foregoing by continuing with ISAs?

Lootman wrote:

kempiejon wrote:Wouldn't some investors have thier ISAs split between a couple of providers? I know I and others posting on here do.
Might there be even more M'ISAaires - or perhaps the HMRC accounted for that?

I am curious why HMRC bothers to try and compile this data, given that there are no tax issues involved. I imagine that the taxman has an interest in subscriptions, to ensure that people stick to the annual limits for new money. But the total value within an ISA has no tax effect, at least until death when inheritance tax may be relevant.

Perhaps the government likes to keep track of how much income and capital gains tax it is foregoing by continuing with ISAs?

Yes it is part of the mindset that all capital and income ultimately belongs to HMG and so anything that results in the taxpayer keeping some of that income and capital is a 'cost'.

Some more info from ii,

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

*ii’s ISA millionaire data was based on data at 31 January 2021 and did not include Share Centre customers, who were migrated on to the ii platform in early February. In February 2021, ii migrated 61,000 customers from The Share Centre on to the ii platform. In March 2021, ii announced the acquisition of the EQi D2C business from Equiniti Group Plc and 59,000 customers were successfully migrated to the ii platform in June 2021.

My ISA was started in 2007 and I haven't funded it to the maximum in three of the years. It isn't worth anything like a million.

D.L.

kempiejon wrote:

Gostevie 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.

Oddly enough I am not surprised by this at all. I'm not there myself yet but I only started in about 2013.

Gostevie

Wouldn't some investors have thier ISAs split between a couple of providers? I know I and others posting on here do.
Might there be even more M'ISAaires - or perhaps the HMRC accounted for that?

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.

D.L.