My £8m ISA account *

[yorkshirelad1]

You could be right. However I knew a couple of senior tax inspectors and chatted to them about ISAs. They took the view that they were a simple vehicle for tax payers to use which needed no (tax) administration by either tax payer or HMRC. As such they saved the significant costs of administration of millions of taxpayers paying, or trying to avoid paying, tax on a large range of investments. They implied that it was relatively easy to check on people playing by the rules using returns from stockbrokers etc.

So maybe, apart from the big amounts reclaimable from a relatively few multi million pound ISAs, (whose owners could immediately afford the costs of setting up complex tax avoidance schemes or moving investments offshore) the returns from making everyone pay tax on ISAs might be offset by complexity and massive admin costs?
Howard

I think that's probably a sensible view, but the problem is the word "sensible". My hunch is that there are plenty of Labour voters who have a nice few ISAs tucked away, thank you very much, and don't want their nest eggs taxed, so I can see there being a sizeable upper limit, well beyond the dreams of Labour voters, but clearly intended to hit those "ISA wealthy" people, beyond which no more annual contributions can be made, but with existing ISA funds allowed to stay in the ISA wrapper. But that would be far too "sensible". Sorry, I've probably given the Chancellor an idea (like someone hadn't thought of it already).

[Lootman]

I've added in the PEP allowances…

Thanks for this. I also seem to recall you could roll a TESSA into an ISA, known as TOISAs, but I don’t remember if there were contribution limits on a TESSA. I think John Major introduced TESSAs when he was briefly chancellor.

Yes it is murky because of that, the single company PEPs and even (one year) an extra subscription allowance if you were over age 50.

Then there was the fact that the subscription allowance was different for shares and funds.

So it might be better to express the max as a range, maybe 350K to 400K.

[monabri]

Thanks for this. I also seem to recall you could roll a TESSA into an ISA, known as TOISAs, but I don’t remember if there were contribution limits on a TESSA. I think John Major introduced TESSAs when he was briefly chancellor.

Yes it is murky because of that, the single company PEPs and even (one year) an extra subscription allowance if you were over age 50.

Then there was the fact that the subscription allowance was different for shares and funds.

So it might be better to express the max as a range, maybe 350K to 400K.

Fair enough.

[tjh290633]

Then there was the fact that the subscription allowance was different for shares and funds.

So it might be better to express the max as a range, maybe 350K to 400K.

initially you were allowed to invest 25% of your subscription in funds maximum, then that was increased to 100% funds in the early 90s.

The allowance could be invested 100% in shares, or 25% in funds, then you could invest 100% in either after the rules were changed.

TJH

[Alaric]

. I also seem to recall you could roll a TESSA into an ISA, known as TOISAs, but I don’t remember if there were contribution limits on a TESSA. .

According to wiki
https://en.wikipedia.org/wiki/Tax-exemp ... gs_account
you could invest up to £ 9000 in total into a TESSA over 5 years. Maximum investment was £ 3000 in the first year and £ 1800 thereafter. In 1990 interest rates were quite chunky, so a decent amount would have accumulated after 5 years.

You could roll over the amounts into continuation TESSAs and then cash ISAs, eventually reaching Stock and Share ISAs when distinct cash ISAs were abolished.

[scrumpyjack]

I'm sure the Tax man is looking forward to his £3.2m in IHT (unless that's abolished!).

The fact that the tax advantages are lost if you take the money out of the ISA is a big incentive for people to keep hanging on to them, and then getting clobbered for IHT. Also having money in an ISA stops people qualifying for means tested benefits, though £8m should fund a very nice care home

[AJC5001]

though £8m should fund a very nice care home

With £8m one could BUY a care home, put it into a business, survive 2 years and pay NO IHT.

Adrian

[Tara]

https://www.telegraph.co.uk/investing/isas/number-isa-millionaires-nearly-triples-one-year

(Pay walled but you can get the drift from the following)

"The number of Isa millionaires has nearly tripled in just a year as savers reap the rewards of long-term investing.

HM Revenue and Customs data shows that as of April 2021, 4,070 savers had a million pounds or more stowed in the tax-free wrapper, compared to 1,480 in the 2019-20 tax year. There were just 450 Isa millionaires in 2015-16.

The top 50 Isa millionaires were sitting on average pots of £8,509,000, according to the data, which was obtained following a freedom of information request on behalf of financial services network the Openwork Partnership. The average Isa millionaire pot was £1,397,000."

I wonder what strategy the top 50 followed?

(Best not to discuss politics...just confine the discussion to the strategy )

ps how do HMRC actually know about non declared accounts or do they know 'everything' ?

* (my £8m ISA...I wish!)

There must be some investors who have invested most of their allowance each year in a favourite share.

And if that share was a company like Apple then it is quite possible that the largest ISA is valued at nearer £100 million.

[Charlottesquare]

It's an interesting phenomenon. Even for us more modest investors.

Starting investing many years ago and getting an annual total return of a modest 8% tax free, every 100k invested turns into a million after a while.

What's interesting me now is how one turns from accumulating wealth into divesting it. Even after making strenuous attempts to spend/give it away.

Or just letting IHT take 40%?

It must be even more of a puzzle if one has accumulated £8 million.

regards

Howard

I wonder how many people have managed to compound at 8% per annum, year on year? I certainly have not.

Dod

I used to (up to 2021) manage average 7% per annum cap/int in my SIPP but the last 2 years have dented that a bit. However to achieve this I did sell out pre the Brexit vote in 2016 and then reinvested post drop and I did bail out re Covid in 2020 and also reinvested in April/May/June that year.

7% is the magic rough doubling of investment every 10 years if compounding (well a little under)

[GoSeigen]

I wonder how many people have managed to compound at 8% per annum, year on year? I certainly have not.

Dod

12-14% here (depending on the ISA). However, I have not worked for 17 years and supported a family all that time from investment alone so after all the withdrawals ISA value is nowhere near £1m sadly.

GS

[Lootman]

I wonder how many people have managed to compound at 8% per annum, year on year? I certainly have not.

12-14% here (depending on the ISA). However, I have not worked for 17 years and supported a family all that time from investment alone so after all the withdrawals ISA value is nowhere near £1m sadly.

8% is just the long-term return from major stock markets so that should be easily possible merely by buying and holding an index fund and reinvesting the dividends.

Even your 12%-14% is below the return on the S&P 500 since 2009 which is about 15% pa plus dividends and currency gains.

It is statistically inevitable that some investors will grow an £8 million ISA just like some will have bad luck and their ISA could go to zero. Similarly some investors will make 15%-20% a year whilst others lose money.

Both extremes of returns imply elevated risk and so for most people an index fund driven 8% annually with low risk is good enough.

Assuming someone maxxed out all ways of contributing to PEPs and ISAs since inception, I calculate that a 22% annual return would get you to £8 million.

[GoSeigen]

Even your 12%-14% is below the return on the S&P 500 since 2009 which is about 15% pa plus dividends and currency gains.

1. I didn't start the ISAs in 2009, it was 2001.
2. I've been short the S&P almost continuously since 2009.
3. The majority of returns were from fixed interest and cash, not stocks.


GS

[Lootman]

Even your 12%-14% is below the return on the S&P 500 since 2009 which is about 15% pa plus dividends and currency gains.

1. I didn't start the ISAs in 2009, it was 2001.
2. I've been short the S&P almost continuously since 2009.
3. The majority of returns were from fixed interest and cash, not stocks.

The S&P 500 was at 666 in 2009 and is now around 4,600. If you were short that market "almost continuously since 2009" then it must have been something else that saved you.

Obviously FI was easy money for the 40 years that interest rates went from nosebleed levels to near zero. But that ship has sailed and I doubt that any of those 8 milsky ISAs got there by buying bonds, at least not without luck and leverage.

[Dod101]

Actually since I have been living off my investments since 1994, I suppose I could well have made 8% on average, including dividend reinvestment. I have never tried to calculate it. I have almost every year withdrawn all my dividends. Interesting.

Dod

[Wuffle]

The cynic in me suspects that some well informed insiders make up some of these.
I have had the reverse experience through a family business getting involved with a 'darling' company and had the opportunity to see through the manipulation (bordering on lies) and it was instructive.
The subsequent collapse well telegraphed to anyone similarly positioned.

W.

[1nvest]

Some will be harvesting motions. 20K ISA top up, plus 40K SIPP, that is migrated over to ISA, so tax credits on the way in (SIPP), no tax on the way out (ISA). Losing holdings/positions in SIPP, hedged in ISA.