ISAs and stealth tax
13 April 2012
How ISAs work
- ISAs or individual savings accounts are a protective wrap to stop the taxman from laying his hands on any gains made on savings - increases in capital invested in company shares, income paid as a dividend from shares or interest from cash or bonds.
- Savers can put away up to £7,000 of investments a year into these tax havens in one maxi-Isa or three mini-Isas. A maxi takes in the full £7,000. Investors can put a maximum of £1,000 in life assurance and £3,000 in cash with the rest in shares or all in shares.
- A mini-Isa allows one account per component with £3,000 for cash, £3,000 for shares and £1,000 for life assurance. These can be from separate providers. You cannot mix and match these allowances as in a maxi.
- Gordon Brown introduced the Isa in 1999, replacing similar tax haven structures for shares called Personal Equity Plans, and the Tax-Exempt Special Savings account for cash.
Stealth tax
- Stamp Duty - Soon after it took office, Labour increased rates to three per cent on homes worth over £250,000, and four per cent on the most expensive properties.
- Since then, soaring property values in London and the South-East have meant that even buyers of modest homes pay thousands to the Treasury every time they move.
- Inheritance tax - The rise in the value of homes has put many elderly people of modest means above the £255,000 assets threshold, making them liable for a tax that was once the preserve of the wealthy.
- Speeding fines - There are now 4,500 speed cameras around Britain and they are expected to raise £180 million this year, a three-fold increase on the cash total only three years ago.
- Council tax - A series of above-inflation increases has pushed the average bill above £1,000 for the first time. Voters tend to blame town halls, not Whitehall, for the extra demands.
- Income tax - - A real-terms freeze on earnings thresholds, while salaries rise steadily above inflation, has propelled middle-earners like teachers and police officers into the 40 per cent tax bracket.
