Abolishing tax on savings.

they might put it in to get votes but they would never honour it...

They probably will but I doubt it'll be a priority. Although with interest rates so low it probably doesn't bring a lot in now. My guess is they'll increase VAT substantially and cut a few other taxes like savings.

In view of the huge mountain of debt that many people have got themselves into, with very little in savings, I think this is a good idea. It would be better to cut taxes on savings to encourage people to save more, and introduce taxes on some types of borrowing to make it more difficult to take out unnecessary loans.

Chris

I wonder about that. If you take cash ISAs as an example of tax free savings, all that's happened is that the banks and building societies offer those at rates lower than any corresponding non-ISA account. What they're doing is snaffling for themselves the tax advantage that should be coming to you and me. It's hard in fact to find a cash ISA that pays any more than you can get elsewhere tax paid.

Who's to say the greedy banks won't do exactly the same, and regard it as a windfall, if all savings accounts were made tax free? Will they really pass on all the benefit to us?

Do they? I've got a regular saver ISA paying 7% with FD, they weren't offering a regular saver non-ISA paying 11.74% or even 8.75%.

I've not found that.

Won't be as bad as the VAT reduction. How many retailers actually lowered prices by the amount of the VAT reduction?

If you take Halifax just as an example, their current cash ISA fixed rates for 2, 3 and 4 years are 3.5, 3.75 and 4.25%. The corresponding rates for

2, 3 and 4 year fixed rate term bonds not in an ISA are 4.0, 4.25 and 4.5%. OK, you'll get back slightly more from the ISAs than you would from the term bonds after basic rate tax, but why are the gross rates consistently lower on the ISAs? It can only be that the bank is taking or 'sharing' what the government intended should really be yours. That's unfair, disreputable and underhand in my view.

And I don't think it's limited just to Halifax.

"Only"? There might be extra admin involved for ISAs. Or more likely there is a behavioural difference in investors - eg for bonds they might account for the likelyhood of early closure, or average investment, which may be different for ISAs.

For instant access accounts, ISAs pay pretty much the same if not more interest than the equivalent non ISA account, eg First Direct are offering an ISA at 2.5% for a year, instant access. Their best offering for non-ISA instant access is 0.25% gross. They've always offered better rates from ISAs - the difference is nothing to do with tax but an expected behavioural difference, people don't tend to use ISAs as instant access even if they can - they tend to invest and leave. And the interest rate drops after a year (when sensible people transfer out).

I doubt that there is any extra administration involved with ISAs, or that there is any real reason to give different rates of interest on what would otherwise be totally equivalent accounts.

Indeed. It's a sprat to catch a mackerel. I don't think you can properly compare rates that include a hefty, temporary bonus, which is why I thought it more realistic to select the longer term accounts I did.

Nationwide were paying around 0.2% on my old ISAS so had to move them to get a decent rate - amazingly the best rate I could get for a NEW ISA (from someone I'd heard of or trusted) just before Christmas was the Nationwide

Compare non-bond accounts then. OK these day most pay FA, but when we had reasonable interest rates ISA accounts were paying much the same as non-ISAs.

Why? I think a lot of people, myself included, look on ISAs as a fairly long-term investment, ie somewhere to put money aside and preserve its tax-free status. It seems sensible therefore to compare term accounts that pay higher rates than instant access ones. Moreover, term accounts are about the only ones you can compare directly these days. Most banks seem to be set on a deliberate course to confuse investors with all sorts of odd terms, introductory rates valid for some period etc, so that no two accounts are directly comparable.

Well, I'm just speaking from my experience this tax year, when I've consistently found that I could get more back after tax from a taxable account than I could from an ISA. I've just invested in a cash ISA for

09/10 because there are only opportunities now to get a slightly higher return from it than from a taxable fixed term bond. Normally, I'd invest at the start of the tax year to have the tax benefit for longest.

Unfortunately, it would appear that all that was talked about what was wrong with the economy will be ignored so they can "fuel growth" or some such rubbish. They will try to get people to borrow to spend money on buying unnecessary rubbish.

In message , Peter Saxton writes

Don't look at me, I was aghast when they removed the requirement to place a one-third deposit on retail goods. It was still called Hire Purchase in those days. Or "On the Never-Never". I can't remember which government did it...

"Credit" sounds so much more respectable, doesn't it?

Because as usual you seem to be selectively picking and choosing evidence to arrive at a general conclusion that banks are ripping off ISA savers.

So banks probably just think ISAs will be left untouched for longer. Therefore they offer better rates for instant access ISAs as they think customers will leave money in after the introductory high rate, but they offer worse rates for long term ISA accounts as they think it's less likely customers will close early and pay the interest penalty.

Doesn't that just show that they _are_ in fact ripping off their customers? Give them an opportunity to take some of the tax advantage that was intended for the taxpayer, and sure as eggs are eggs they'll take it.

What I'd like to see is an end to the banks knowing whether your savings are in an ISA or not. It's frankly none of their business. I think it's a personal matter between you and the government, or at least it should be. Then they'd have to compete fairly. If they offered, say, a 3 year bond, they'd have just one rate that would have to be competitive, not a reduced ISA rate so that the investor can have some but not all of the tax advantage that the government intended.

Hire Purchase is different to buying on credit

You have the legal right to stop paying and send the goods back with HP.

tim

"tim...." wrote

Isn't that only after paying half of the price?

Erm, WTF was what I wrote above got to do with the taxation status? It's to do with expected investor behaviour.

Yeah but the same applies to wages etc. The government likes employers, banks etc acting as tax collectors for them because it's easier.