British government tries to encourage people to save with amended ISA regulation
The British are saving too little. According to the website creditaction.org.uk only about 40% of the population think about their financial future and just below 30% don’t have any savings at all. This number is alarming! With this attitude the British have managed to accumulate a huge mountain of consumer debt as they rather spend money then save it.
Already as far back as in 1999 the British government has tried to encourage people to save money in order to have a secure financial future by introducing ISAs – independent savings accounts. With these accounts people are able to have tax free savings up to a certain level each year. However, recent statistics prove that the scheme hasn’t been accepted by the general public as a lot of young British don’t even know that an ISA is.
Therefore, from 6th April 2008 the rules will be changed in order to make the ISA system more understandable. The annual allowance will be 7,200 pounds for 2008 of which you can save one half in cash and the other half in stocks or shares. The HMRC website gives all information about this new approach.
Obviously the advantage of an ISA is that you have to pay no tax and also no capital gains tax on shares. However, an ISA has less flexibility than a normal savings account as withdrawing money is more complicated. Also you can only switch your stocks in to cash but you can’t exchange cash for shares.
The British government now has to evaluate if ISAs become more accepted with the new amendments and if this measure can encourage the British to finally take care of their financial future.