The Cash ISA threat is real - act now
🔸 Plus: “Sell a kidney if you must, but keep the Bitcoin”? 🔸 GB News loses £33 million a year 🔸 Stripe staff lurk in sketchy web chatrooms 🔸
Your 2-minute guide to demystifying money and making you richer
The markets, year-to-date
S&P 500: 5,954.50 ⬆️ 1.24%
FTSE 100: 8,809.74 ⬆️ 6.65%
Bitcoin: $84,647.45 ⬆️ 9.43%
GBP to USD: $1.2573 ⬆️ 0.44%
GBP to EUR: €1.2115 ⬆️ 0.16%
(As of Friday market close.)
Rachel Reeves is seriously considering axing the £20,000 tax break on Cash ISAs
A couple of weeks ago Moneyin2 told you about the conspiracy to kill the £20,000 Cash ISA tax break. Currently, the law in the UK allows you to deposit up to £20,000 in a cash savings account and all the interest you earn on that is free from tax. The same £20,000 allowance applies to Stocks & Shares ISAs. The law is intended to encourage you to save and invest for your future — and it’s a great way to build wealth if you want long term financial security and independence.
But Chancellor Rachel Reeves is being lobbied by City investment managers who want the tax break for Cash ISAs taken away. They argue that Brits are too risk averse. If you’ve got money to save you’re better off putting it into stocks for the long term than you are keeping it in cash even if the cash pays interest. And of course, they are self-interested: they want to earn fees by helping you choose your investments.
After a flurry of negative publicity — about 8 million people have Cash ISAs and none of them want to start paying taxes on their life savings — it seemed as if the threat to Cash ISAs was going away.
But, like zombie, it’s not dead yet
“At the moment there is a £20,000 limit on what you can put into either cash or equities, but we want to get that balance right,” she said recently. “I do want to create more of a culture in the UK of retail investing like what you have in the US, to earn better returns for savers and support the ambition to grow the economy”.
There is a LOT going on in that statement.
Let’s break it down
The words “we want to get that balance right” suggest Reeves is considering changing the amount you can deposit in a Cash ISA tax-free but perhaps leaving the £20,000 benefit on Stocks & Shares ISAs. At the moment, you can distribute your £20,000 however you want: Cash ISA, Stocks & Shares ISA, Lifetime ISA, etc.
Maybe Reeves is going to do something like cut the Cash ISA allowance to £4,000, thus forcing people into Stocks & Shares ISAs if they want to take advantage with the remaining £16,000. We don’t know yet.
And this: “I do want to create more of a culture in the UK of retail investing like what you have in the US.” That strongly suggests she thinks too many Brits are storing their money in cash and losing out on the long-term benefits of being in stocks. She’s right about that. It’s virtually impossible to retire on cash savings alone. You need the benefit of the long-term returns you get from stocks. So maybe she’s thinking of leaving the Stocks & Shares ISA tax break alone.
UK companies only?
But then there is the end of her quote: “support the ambition to grow the economy”. The only way to support the economy by changing the rules around ISAs would be to restrict the tax break to investments in UK companies only. That would create an incentive to put your money into UK stocks instead of US stocks, which is where most money goes right now.
On paper this seems like a good idea for the country. Support our companies! But if you compare the long-term performance of the FTSE 100 to the S&P 500 you can see that it would be negative for UK investors because the FTSE historically underperforms its American cousin. (And yes, we know that this year the FTSE is outperforming the S&P — but a two-month time period is NOT a good gauge of performance!)
Regardless, it looks as if the tax break for Cash ISAs could be about to change. So if you want to shield your savings from tax, and for some reason you don’t want to be in stocks, now is the time to take advantage of a Cash ISA.
The Moneyin2 Guide to Wealth
The Moneyin2 Guide to Wealth will get you the biggest return on your savings by maximising cash matches from your employer, free cash from the government, and shielding your investment gains from tax. It takes you step-by-step through the world of pensions, SIPPs, ISAs and ETFs — all in plain English.
And for dessert …
“Sell a kidney if you must, but keep the Bitcoin.” Bitcoin has fallen sharply in recent days but Strategy’s Michael Saylor thinks you should hodl. We told you, it’s risky.
GB News loses £33 million a year. It only has revenue of £15.7 million.
Stripe — the payments app — has counterintelligence teams that lurk in sketchy internet chatrooms where scammers refine their techniques.
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I enjoy your take, however on comparing the performance of the S&P 500 against the FTSE 100 over the most recent timeframe is misleading in so far as it gives the impression that’s been the norm. It’s only been in recent times that the outperformance has been so stark driven in the main by the tech sector coupled with a strengthening $.