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Share ISAs with large capital growth and the Labour Party

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IanSmithISA
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Share ISAs with large capital growth and the Labour Party

#122506

Postby IanSmithISA » March 6th, 2018, 7:54 am

Good morning,

I have a Share Dealing ISA and I suspect that many or most people here have as ISA of some sort as well.

I am now drifting towards the view that those with serious capital gains in their Shares ISA might want to give serious consideration to moving holding out of the ISA.

The reason is entirely political, it seems very possible that a Jeremy Corbyn lead Labour government is just around the corner.

The Telegraph did that article about Millionaire ISA holders and they would be a nice juicy political target and whilst financially there is not much easy money to be had by abolishing ISAs it would be politically symbolic, the sort of thing to be promised during the campaign as a sound bite and then have to be carried through.

If they were to do so the obvious choices would seem to be.

Stop New Contributions.
In this case no new funds would be allowed to be added to the ISA but funds currently within the ISA would continue to be CGT/Income tax free.

I suspect that is very unlikely to be the chosen option as it is a politically weak position to take.

I also suspect that it would susceptible to a legal challenge, the idea that some people can have tax free income and some can't just seems so wrong that someone would go the courts.

ISAs simply cease to exist.
This seems the most likely route, the whole ISA concept disappears and in effect the shares are moved back into a normal share dealing account with Income Tax on dividends and CGT applied.

If you accept this then imagine the position that starting from the Tax Year 2020-2021 Share ISAs cease to exist and at Aug 2020 your holdings are

Company Old - Bought Jan 2014
Company Medium - Bought Jan 2020
Company New - Bought July 2020

and that you wish to sell everything.

Clearly Company New will be subject to CGT, Company Medium and Company Old might or might not be. Only when the law to remove ISAs is created will we know if CGT is to be applied to shares already within an ISA when the ISA ceases to exist.

In the case of Company Medium it may not matter too much, depending upon your circumstances and strategy as the CGT amount would probably be quite small.

In the case of Company Old and the law becoming the sale is subject to CGT then you have over six years of capital growth, that could be ouch!

It seems likely that moving this Company Old out of the ISA now is likely to escape the possible CGT liability, but at the risk of losing the ISAs advantages and another Conservative government being elected making the whole process unnecessary.

It may even be that for people with very risk averse investments the lack of ISA protection makes their portfolios poor investments.

One thing that does seem very unlikely is that a subsequent Conservative government would reinstate ISAs allowing you to go back to your pre Labour balances. They may reinstate ISAs but starting with zero balances seems much more likely.

As a short term holder I haven't thought through the subject to much for those with long term holdings. :D

Bye

Ian

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Re: Share ISAs with large capital growth and the Labour Party

#122516

Postby Alaric » March 6th, 2018, 8:33 am

IanSmithISA wrote:The Telegraph did that article about Millionaire ISA holders and they would be a nice juicy political target and whilst financially there is not much easy money to be had by abolishing ISAs it would be politically symbolic, the sort of thing to be promised during the campaign as a sound bite and then have to be carried through.


Closing or restricting the amount of new money that can be invested is about as far as a government could go without facing a legal or moral challenge. Even if a gains tax were to be imposed, could it be legally retrospective? Perhaps more likely, only gains from day X.

Abolishing ISAs would be portrayed as a Marxist sound bite, but perhaps the Labour party now owns up to this. In previous years apologists would have been out in force denying any such interpretations.

Putting a lifetime limit on ISA subscriptions is another possibility. Retrospectively though I doubt the records exist in sufficient detail and reliability and applying it to capital values creates its own complexity as seen with the attempt to apply similar rules to pensions.

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Re: Share ISAs with large capital growth and the Labour Party

#122517

Postby swill453 » March 6th, 2018, 8:34 am

I think the chances of any change affecting shares already within ISAs are tiny, and the chances of the CGT base value being the original, in-ISA purchase price (which might have been a few ISA-moves ago, 15+ years ago) entirely non-existent.

So I certainly don't see any value in taking action now.

Scott.

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Re: Share ISAs with large capital growth and the Labour Party

#122529

Postby Lootman » March 6th, 2018, 9:44 am

Alaric wrote:Putting a lifetime limit on ISA subscriptions is another possibility. Retrospectively though I doubt the records exist in sufficient detail and reliability and applying it to capital values creates its own complexity as seen with the attempt to apply similar rules to pensions.

Yes, the problem is that ISAs have never done tax reporting because they have never needed to. Whereas taxable accounts produce tax certificates and (usually in my experience) keep track of the cost basis, ISAs typically would not.

I have held such accounts since they started out as PEP's thirty or so years ago. It would be quite impossible for me to determine the cost basis for my positions. It would also be near impossible for HMRC to do that, at least on any scale, so it couldn't be enforced either.

In such a situation it would be treated more like a transfer or death i.e. the taxable cost basis would be the valuation on the day that ISAs are abolished (if that ever happened).

I think it is more likely that the annual contribution may be reduced, on the grounds that a couple who have a spare 40K a year lying around could easily be portrayed as "wealthy". or some kind of lifetime contribution limit. Or ISAs continue as is but a "Wealth tax" type percentage fee applied annually to its value.

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Re: Share ISAs with large capital growth and the Labour Party

#122532

Postby Spet0789 » March 6th, 2018, 10:09 am

Not to bring everything back to Brexit, but once/if we have left the EU, there is no longer anything in law to prevent a radical Labour government with a majority in Parliament from legislating to seize every single penny in ISAs. Parliament is sovereign and could no longer be constrained by EU law protecting property rights.

I don’t think that will happen but it could. Far more likely is a one-off ‘solidarity levy’ of say 20% on any investments beyond say £20k, whether in ISAs or not, combined with new uncapped Council tax bands. Everything points towards far greater taxation of wealth.

This is one of the many reasons why I am terrified that:- messy Brexit —> voters hate Conservatives —> Corbyn and co let loose —> disaster.

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Re: Share ISAs with large capital growth and the Labour Party

#122544

Postby Alaric » March 6th, 2018, 10:45 am

Lootman wrote:I have held such accounts since they started out as PEP's thirty or so years ago. It would be quite impossible for me to determine the cost basis for my positions. It would also be near impossible for HMRC to do that, at least on any scale, so it couldn't be enforced either.


I was thinking more in terms of a limit for how much could be put into a PEP/ISA over a lifetime. But unless designed in from the beginning, records would not have been kept. It would be possible to invoke a contribution limit from some future day X. Records of the total contribution made would have to be transferred along with the assets when moving to a new provider. Again that might end up in a "too difficult or messy" box.

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Re: Share ISAs with large capital growth and the Labour Party

#122575

Postby Slarti » March 6th, 2018, 12:19 pm

IanSmithISA wrote:The reason is entirely political, it seems very possible that a Jeremy Corbyn lead Labour government is just around the corner.

The Telegraph did that article about Millionaire ISA holders and they would be a nice juicy political target and whilst financially there is not much easy money to be had by abolishing ISAs it would be politically symbolic, the sort of thing to be promised during the campaign as a sound bite and then have to be carried through.

If they were to do so the obvious choices would seem to be.


Thinking of who my friends and relatives are, who are actually members of the Labour Party, most are teachers, Civil Servants, local authority staff, members of the NHS and so on. They would all be hurt by any attack in ISAs so I would suggest that any such thing would be political suicide within the Labour Party, never mind outside it.

In my book, it is nothing to worry about.


Slarti

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Re: Share ISAs with large capital growth and the Labour Party

#122605

Postby Spet0789 » March 6th, 2018, 1:58 pm

Slarti wrote:
IanSmithISA wrote:The reason is entirely political, it seems very possible that a Jeremy Corbyn lead Labour government is just around the corner.

The Telegraph did that article about Millionaire ISA holders and they would be a nice juicy political target and whilst financially there is not much easy money to be had by abolishing ISAs it would be politically symbolic, the sort of thing to be promised during the campaign as a sound bite and then have to be carried through.

If they were to do so the obvious choices would seem to be.


Thinking of who my friends and relatives are, who are actually members of the Labour Party, most are teachers, Civil Servants, local authority staff, members of the NHS and so on. They would all be hurt by any attack in ISAs so I would suggest that any such thing would be political suicide within the Labour Party, never mind outside it.

In my book, it is nothing to worry about.


Slarti


Not sure I share your optimism. For many of the people you list, their most valuable asset is the accrued rights on their public sector pension. You can bet your bottom dollar that form of saving for the future will be looking good under a Corbyn govt.

A surprisingly small number of people have financial savings over £20k. Would be very easy for Labour to confiscate some amount of that excess without too much political damage.

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Re: Share ISAs with large capital growth and the Labour Party

#122609

Postby Lootman » March 6th, 2018, 2:12 pm

Spet0789 wrote:A surprisingly small number of people have financial savings over £20k. Would be very easy for Labour to confiscate some amount of that excess without too much political damage.

How surprisingly small is that number? I read somewhere that there are about two million households with a net worth of over a million. That implies that households with a net worth of over 20K must be many millions. That's a good number of votes.

More generally, one can always put forward the argument that the poorest, say, 80% of the population could vote themselves a government which would massively redistribute the wealth of the other 20%. But the voters never do, at least not in this country for the last few decades. The numbers indicate that could happen, but in practice I think the voters realise that a "war on success" would probably make the poor poorer whilst the rich just emigrate to escape punitive taxation.

ISAs cannot be moved of course, but if Corbyn chose the "wealth tax" route, which I believe he would, then you'd have to close the ISA to move those funds overseas AND preferably do that before Corbyn slaps on the inevitable exchange controls.

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Re: Share ISAs with large capital growth and the Labour Party

#122644

Postby Slarti » March 6th, 2018, 4:24 pm

Spet0789 wrote:Not sure I share your optimism. For many of the people you list, their most valuable asset is the accrued rights on their public sector pension. You can bet your bottom dollar that form of saving for the future will be looking good under a Corbyn govt.

A surprisingly small number of people have financial savings over £20k. Would be very easy for Labour to confiscate some amount of that excess without too much political damage.


Well when talking to Labour Party member friends about money, the normal discussion has been to argue if self select ISA is a better route than tracker. Everybody had one sort or another, since they first became available, as the obvious way to save for new cars, holidays, children's/grandchildren's education or just a rainy day.

Where do you get the "surprisingly small number of people have financial savings over £20k" from?

Slarti

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Re: Share ISAs with large capital growth and the Labour Party

#122659

Postby swill453 » March 6th, 2018, 5:09 pm

Money Advice Service have a 2016 survey showing that 40% of people (16.8 million) have savings of less than £100 https://www.moneyadviceservice.org.uk/e ... ncial-risk

I can't get the link to the full report to work just now.

Scott.

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Re: Share ISAs with large capital growth and the Labour Party

#122661

Postby Lootman » March 6th, 2018, 5:17 pm

swill453 wrote:Money Advice Service have a 2016 survey showing that 40% of people (16.8 million) have savings of less than £100

I saw a number somewhere else that indicated that half the population have a zero or negative net worth, and of course live paycheck-to-paycheck, or more likely, welfare-handout to welfare-handout.

Yet somehow they don't vote to redistribute wealth and personally I find that to be life-affirming proof that envy is not a political power point.

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Re: Share ISAs with large capital growth and the Labour Party

#122663

Postby Slarti » March 6th, 2018, 5:24 pm

swill453 wrote:Money Advice Service have a 2016 survey showing that 40% of people (16.8 million) have savings of less than £100 https://www.moneyadviceservice.org.uk/e ... ncial-risk

I can't get the link to the full report to work just now.

Scott.


Well the link at the end of the press release is
https://masassets.blob.core.windows.net ... _FINAL.pdf

From the end of that
More detail of the research, commissioned by Money Advice Service, used to inform
this report can be found below
2016 Savings Literature Review
An evidence review of secondary data sources intended to help the Money Advice
implement the Financial Capability Strategy by examining the existing savings
evidence base in terms of what works in encouraging saving among working-age
adults. It also identifies gaps in the evidence.
The review focuses on:
■ people of working-age – although much of the evidence reviewed covered adults
of all ages;
■ people on low to middle incomes;
■ adult cash savings (rather than investments or saving for children); and Community
based interventions.


All that is talking about is ready cash savings and by that definition I've got less that £1k savings, but I have much, much more that can be accessed during business hours, if needed.

I think that is a misleading press release and report, produced by a government organisation that is not independent or unbiased.

Slarti

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Re: Share ISAs with large capital growth and the Labour Party

#122683

Postby Spet0789 » March 6th, 2018, 6:37 pm

Lootman wrote:
Spet0789 wrote:A surprisingly small number of people have financial savings over £20k. Would be very easy for Labour to confiscate some amount of that excess without too much political damage.

How surprisingly small is that number? I read somewhere that there are about two million households with a net worth of over a million. That implies that households with a net worth of over 20K must be many millions. That's a good number of votes.

More generally, one can always put forward the argument that the poorest, say, 80% of the population could vote themselves a government which would massively redistribute the wealth of the other 20%. But the voters never do, at least not in this country for the last few decades. The numbers indicate that could happen, but in practice I think the voters realise that a "war on success" would probably make the poor poorer whilst the rich just emigrate to escape punitive taxation.

ISAs cannot be moved of course, but if Corbyn chose the "wealth tax" route, which I believe he would, then you'd have to close the ISA to move those funds overseas AND preferably do that before Corbyn slaps on the inevitable exchange controls.


ONS data at link below. Median financial assets of the 25 million odd households assessed was 9k. Note that’s households and excludes the poorest who report no assets so the true median per voter might be nearer to 6k.

I would estimate that less than 1/3 of voters have financial assets worth more than £20k. Net worth stats obviously include property which is a big number.

Are we all still so confident Corbyn and his toxic Marxist crew wouldn’t cream off some savings. If not a £20k threshold, there will be some slightly higher level where the electoral damage will be offset by the thought of all that extra cash for the NHS. Be afraid.

https://www.ons.gov.uk/file?uri=/people ... ate5.2.xls

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Re: Share ISAs with large capital growth and the Labour Party

#122685

Postby Spet0789 » March 6th, 2018, 6:40 pm

Lootman wrote:
swill453 wrote:Money Advice Service have a 2016 survey showing that 40% of people (16.8 million) have savings of less than £100

I saw a number somewhere else that indicated that half the population have a zero or negative net worth, and of course live paycheck-to-paycheck, or more likely, welfare-handout to welfare-handout.

Yet somehow they don't vote to redistribute wealth and personally I find that to be life-affirming proof that envy is not a political power point.


Let’s keep our fingers crossed. Loads of them came out of the woodwork to vote in the referendum as for the first time they thought their vote would make a difference. And it did.

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Re: Share ISAs with large capital growth and the Labour Party

#122686

Postby Lootman » March 6th, 2018, 6:43 pm

Spet0789 wrote:I would estimate that less than 1/3 of voters have financial assets worth more than £20k. Net worth stats obviously include property which is a big number.

Maybe so but, again, hasn't that been the case for the last 40 years? And haven't the voters continually rejected such shallow, envious and confiscatory ideologies?

Sure it could happen but then wouldn't we all just leave the UK, just like the Brain Drain of the 60's and 70's? And leave the great unwashed hoi polloi to tax themselves back into the stone age?

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Re: Share ISAs with large capital growth and the Labour Party

#122734

Postby johnhemming » March 6th, 2018, 9:15 pm

Spet0789 wrote:Not to bring everything back to Brexit, but once/if we have left the EU, there is no longer anything in law to prevent a radical Labour government with a majority in Parliament from legislating to seize every single penny in ISAs. Parliament is sovereign and could no longer be constrained by EU law protecting property rights.

Although you have a valid point there also remains Article 1 Protocol 1 of the European Convention on Human Rights (which is nothing to do with the EU).

https://www.equalityhumanrights.com/en/ ... n-property

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Re: Share ISAs with large capital growth and the Labour Party

#122742

Postby JMN2 » March 6th, 2018, 10:03 pm

Spet0789 wrote:...I am terrified that:- messy Brexit —> voters hate Conservatives —> Corbyn and co let loose —> disaster.


This.

Anywhere really where socialism failed it is not advocated. Ask a Pole or an Estonian. Champagne socialist youngsters..one consolation is they will experience the 24/7 jack boot stomping on their gender neutral faces.

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Re: Share ISAs with large capital growth and the Labour Party

#122750

Postby Spet0789 » March 6th, 2018, 10:24 pm

JMN2 wrote:
Spet0789 wrote:...I am terrified that:- messy Brexit —> voters hate Conservatives —> Corbyn and co let loose —> disaster.


This.

Anywhere really where socialism failed it is not advocated. Ask a Pole or an Estonian. Champagne socialist youngsters..one consolation is they will experience the 24/7 jack boot stomping on their gender neutral faces.


I think it’s been pointed out before but you have to be 60 or older to have any meaningful adult memories of how disastrous socialism is. British voters haven’t been innoculated against it by bitter experience. That’s why I’m so worried.

Personally I wasn’t born until Thatcher but i have read enough to know how genuinely crap this country was in the 70s. Not saying the 80s or 90s were perfect - far from it - but Britain has come on so much since the 70s.
Last edited by Spet0789 on March 6th, 2018, 10:33 pm, edited 1 time in total.

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Re: Share ISAs with large capital growth and the Labour Party

#122751

Postby JMN2 » March 6th, 2018, 10:30 pm

Spet0789 wrote:
JMN2 wrote:
Spet0789 wrote:...I am terrified that:- messy Brexit —> voters hate Conservatives —> Corbyn and co let loose —> disaster.


This.

Anywhere really where socialism failed it is not advocated. Ask a Pole or an Estonian. Champagne socialist youngsters..one consolation is they will experience the 24/7 jack boot stomping on their gender neutral faces.


I think it’s been pointed out before but you have to be 60 or older to have any meaningful adult memories of how disastrous socialism is. British voters haven’t been innoculated against it by bitter experience. That’s why I’m so worried.


I remember this
https://en.wikipedia.org/wiki/Finlandization

and these kinds of documentary films at school
https://youtu.be/_dFG99vi8OY


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