FT article by Moira O’Neill

[Steveam]

Title: Seize the ISA advantage while you can

She suggests that the ISA regime of multiple types is ripe for simplification but that such reform may be a tempting target for cash strapped governments.

I don’t seem to be able to link to FT articles.

“Inflation has already undermined the annual Isa allowance, stuck at £20,000 since April 2017. Perhaps we shouldn’t read too much into this. The annual maximum contribution was £7,000 for the first nine years. Had it risen with inflation since the start, Hargreaves Lansdown estimates it would be just over £12,000. By that comparison, £20,000 feels generous.”

Best wishes,

Steve

[mc2fool]

https://www.ft.com/content/956536f6-e36a-4f70-b0f5-8dec7971a6b5 for FT subscribers
https://www.google.com/search?q=FT+Seize+the+ISA+advantage+while+you+can and click on the FT result for non-subscribers

[absolutezero]

Labour will hammer ISAs. Mark my words.

[Lootman]

Labour will hammer ISAs. Mark my words.

I remain convinced that ISAs are a cunning government plot to ensure that people are bribed into maintaining the maximum amount of their net worth into them, so that the government can then grab 40% of the value of them in IHT. Which would of course dwarf the amounts of dividend tax and CGT that they might otherwise have collected.

My own plan is to liquidate my ISA and then IHT-proof those assets,

[Kantwebefriends]

My own plan is to ... IHT-proof those assets

How?

[Lootman]

My own plan is to ... IHT-proof those assets

How?

My point was limited to noting that as long as assets are in an ISA then they cannot be held as joint assets with a spouse, which would make them moot for IHT.

But once those assets are outside an ISA then they can be used to:

1) Buy an annuity, or
2) Give them away, or
3) Spend them, or
4) Otherwise make them vanish

And so on. It is harder to IHT-proof assets in an ISA than outside one.

[Newroad]

Hi Lootman.

If ISA's are a cunning government plot, they must be a Whitehall led one - otherwise you are suggesting multiple parties, coalitions and the various hues thereof have done so in a coordinated manner over time hitherto not seen.

Tax free savings and similar are always subject to legislative risk - just another risk we have to factor into investing. Like most things, if it seems to good to be true, it probably is - so in this case, if the benefits are deemed too great in time, then yes, there may well be a partial clawback of some form.

Regards, Newroad

[scrumpyjack]

It's not just IHT that makes ISAs beneficial to the State. By saving into ISAs people then have more net assets and so become ineligible for means tested benefits.

[terminal7]

My own plan is to ... IHT-proof those assets

How?

My point was limited to noting that as long as assets are in an ISA then they cannot be held as joint assets with a spouse, which would make them moot for IHT.

But once those assets are outside an ISA then they can be used to:

1) Buy an annuity, or
2) Give them away, or
3) Spend them, or
4) Otherwise make them vanish

And so on. It is harder to IHT-proof assets in an ISA than outside one.

Totally agree Lootman with stripping money out of ISAs - particularly for 2) and 3). Indeed, gave son/dil substantial amount to help them some 7 years ago to buy a flat. That's all fallen out of the IHT net. Paid lots of nursery fees - that's all falling out of IHT net. Just paid off their remaining mortgage - hopefully either OH or I will live 7 years - anyway it's tapering away. Few years ago bought new car and gave old car to them. Various other expenditures - all geared to ensure IHT minimised.

T7

[DrFfybes]

Labour will hammer ISAs. Mark my words.

I remain convinced that ISAs are a cunning government plot to ensure that people are bribed into maintaining the maximum amount of their net worth into them, so that the government can then grab 40% of the value of them in IHT. Which would of course dwarf the amounts of dividend tax and CGT that they might otherwise have collected.

My own plan is to liquidate my ISA and then IHT-proof those assets,

IHT is a voluntary tax.

If your aim of your ISA is to grow assets in order to pass them on when you die, then really you're not using the correct savings vehicle in the first place.

We have unsheltered holdings, pensions, and ISAs.

Under current rules we will be spending our non DB pensions last, as they fall outside of IHT. We still top them up as much as practicable, and will continue to do so whilst we have unsheltered holdings. The problem with this approach is WHEN they remove or cap the IHT exemption for pensions, and it is a tricky balancing act. If that happens we will draw then and give the money away, and hope to live 7 years.

Paul