Most financial planners have reacted with disbelief at the treasury’s latest attack on ISA benefits.
Chancellor Rachel Reeves announced that she was introducing a 22% tax on the cash element of stocks and shares ISAs. Over 4 million people currently hold investments in stocks and shares ISA’s and a further 12 million people hold cash ISAs. So, this change to ISA benefits is going to affect a lot of people.
The idea seems to be to close a possible tax loophole where people are getting tax relief for holding cash inside an ISA. But experts in the ISA industry believe that there is almost no way that the treasury are going to be able to find out what the cash elements are. There are also valise reasons for people to be holding some element of cash within their investments ISA’s. So far, the chancellor has not provided any explanation to why she has introduced this extra (complicated) tax.
Most financial planners think the tax will deter people from investing in ISAs. Which is the exact opposite of what the government wants people to do.
Are Child Trust Funds in danger as well?
There are always unintended consequences when the treasury starts to introduce new tax measures. For example, will the tax charges apply to Child Trust Funds (CTF’s) or will these continue to be tax free.
CTF’s were introduced back in the early 2000’s to create a tax-free savings vehicle for children born between September 2002 and January 2011. The government initially paid in £500 per child and over 6 million CTF’s were set up. The idea was to give every child something to help them when they turned 18. Parents could top up the CTF’s tax free as well.
The scheme was discontinued in 2011.
HMRC has now admitted that over 750,000 CTF’s remain unclaimed despite the children now being over 18. To help they have set up a search function to help people track down their CTF’s. The link is here.
Don’t panic is the advice
With the change of Prime Minister speculation has started again as to what new taxes he may decide to introduce. The best advice however is to sit tight and wait and see. Too many people have made decisions about their pensions and investments based on speculation which they alter regretted.
Figures showed that over £10 billion was withdrawn from pensions over the last two years for example, as a result of speculation about Rachel Reeves taxing tax free cash, which didn’t happen.
Worth checking your premium bonds
Over £6 billion worth of premium bonds have been sitting with NS&I for over 10 years without any withdrawals or deposits being made. The contact details have also never changed suggesting that the accounts may have been forgotten. If you think you may have some premium bonds its worth checking with NS&I.
The average holding is over £5,000.
Get more information.
If you would like to discuss ISA benefits, then why not contact Christina today. We offer a free initial meeting to discuss your requirements and explain how our service works. You are under no obligation to use us after that if you don’t want to and we won’t pester you.
So why not call us today on 01282 614444 or e mail us enquiries@ccfps.co.uk or use our contact form online.
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