More Tory Misinformation - this time about ISAs

Once again the Tories are spreading misinformation.

This time it’s an email from Mel Stride to people on the Tory mailing list dramatically entitled, Stop the Savings Tax. And it helpfully invites you to sign a petition against the Government’s plans to impose a savings tax.

Lovely!

Except that even the most basic Google search quickly reveals that the Government almost certainly has no such plans in the first place. The whole thing is a total distortion of some fairly plausible rumours.

Here’s part of the email (with an annotation by me):

What this is about is cash ISAs. An ISA (Individual savings account) is a Government scheme were you can save money and you don’t have to pay tax on any interest you earn. You are allowed to invest £20 000 a year maximum. So if you invest £20K in one year, then another £20K the next year and so on, you can quickly build up a pretty huge pot of money for which you pay no tax on any interest. Well, if you’ve got that much money spare in the first place. There are a few different types of ISA:

• A cash ISA is basically like a bank account that will pay you a small amount of interest.
• There’s also a stocks and shares ISA – which means it’s used to invest in companies, and you’re likely to earn more, but with a risk that you’ll lose money if shares go down.

The Government (quite sensibly) want to encourage more investment in British industry, and has been thinking about changing the rules on ISAs to encourage this. The rumoured proposal is that cash ISAs will be restricted to a max investment of £10K a year. The total amount you can save will stay at £20K per year, but anything over £10K would have to be in a stocks and shares ISA. There were reports Rachel Reeves was going to make this change in April. She didn’t, and now there are reports she’s thinking again of doing that.

So let’s be clear: Even if it happens, it’s not a tax increase. It would be a restriction that if you want to get a tax-free return on the full £20K, then you’ll have to invest some of it in stocks and shares – which is actually likely in the long run to earn you a fair bit more money, as well as being better for British industry.

Besides, realistically, if you’re able to save that much every year, you’re probably not exactly struggling to get by. Some people might question why someone able to save so much should be able to completely avoid tax on so much savings income anyway, when people who work and earn a living don’t get to do that.

Just to help the Tories out a bit with their communications, I’ve screenshotted their petition (at https://www.whatlaboursaid.com/stop-the-savings-tax) and added a couple of explanatory notes.