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With a new government just taking office and studying an ugly-looking £20bn hole in the backlog, there may be an important question on the lips of many British investors: Are the benefits of one of the world's biggest investment vehicles coming to an end? Isn't 25 years of the use of Individual Savings Account (ISA) a long time in this world? In simple terms, is a Shares and Shares ISA safe?
Are you safe or not?
ISA is definitely a blockchain competitor. The workers promised that they will not affect taxes that will affect working people such as income tax or VAT. That cuts out big sources. And with ISAs in total estimated to provide £7bn of relief, there's a good chunk of moolah here that can be reinvested into the tax coffers.
One plan put forward by the think tank Resolution Foundation was to set up £100k in ISA accounts. It is not clear from that report (that I have seen) whether that meant £100k in deposits or £100k in accounts. Either way can be disastrous for those looking for a second income. 4% reduction on what you earn £4k a year. Not exactly retirement income.
The good news is that I believe that plan or any other will not exist. Data from the Resolution Foundation shows that the proposed ISA cap would generate just a fraction of ISA tax relief – just £1bn a year. That's not easy to plug that £20bn hole and such a small bond in the deficit doesn't seem worth pissing off 12m or so with Stocks and Shares ISAs.
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Some good news comes from the government itself. Recent reports say that they “don't want to complicate the investment situation”. They were referring to their scrapping of the previous government's plans for Britain's ISA but if we take it one step further then any cap seems like a huge U-turn on that little quote.
As for what I should put in my (hopefully safe as houses) Shares and Shares ISA, British American cigars (LSE: BATS) is one stock that benefits the most from ISA tax benefits due to its large dividends.
The company paid a yield of 8.04% last year, one of the highest payouts FTSE 100. Within an ISA, that money (around £1,600 a year with a maximum deposit of £20k) is sent to me tax-free, avoiding the potential 39% benefits for higher rate taxpayers.
Others may wish to avoid a business that is losing customers. Although I accept that this is the company's biggest challenge in the long term, global consumption is still growing and is expected to reach at least 2030. So, I own the shares myself.
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