British ISA plans look set to head for the scrapheap
- The UK government has reportedly dropped plans for a ‘British ISA’.
- There have been concerns that it will ‘complicate’ the investment market for individuals.
- There has not yet been a formal announcement, but it would be a welcome move if the proposal is abandoned.
Dan Olley, chief executive officer, Hargreaves Lansdown
‘’We’re pleased that the government will not be pursuing this because simplicity is key when it comes to getting people to start investing. That’s why the ISA allowance is so essential, it helps people start investing without any of the complexity around tax. The UK ISA would have added complexity with little real benefit for many. Our data clearly shows that British retail investors are already enthusiastic backers of British companies. Of those equities held on HL’s platform, 80% of the trades in the last year were on the London markets.
The key to investing is to start early to benefit from the power of compounding over time, but many people lack confidence or time to do so. This is a challenge to be addressed. Our April 2024 Savings and Resilience Barometer report shows that there are over 12 million households who have excess cash that could be invested to improve their long-term resilience, but aren’t doing it. Plans to revise the current advice/guidance boundary to allow firms to provide more relevant information to consumers, based on their personal circumstances, to help them get started could be a game changer here, helping more people across the UK to make their money work harder for them and build a secure financial future.”
Susannah Streeter, head of money and markets, Hargreaves Lansdown:
‘’It’s somewhat of a relief to see plans for a British ISA looking set to hit the buffers. A separate ISA focus on UK equities might end up providing no additional boost to investment in the country. Those who already max out their £20,000 ISA allowance could have simply hived off all their existing UK holdings to the British ISA, and used the extra wiggle room to invest more overseas in their usual ISA.
Tax wrappers like ISAs and SIPPs make all the difference to people building their pots for the future and for major events in their lives. ISAs are part of the furniture – in a good way. They’ve been around for a quarter of a century and are well-established and well loved. Of course, like anything we’ve been wedded to for so long, we can always think of ways they could improve. But, while small changes would be welcome, the government needs to beware of major reforms and changes that could end up disincentivising investment at a time when more people need to increase their financial resilience. So, it’s crucial that tax free allowances are maintained to encourage greater long-term investing.
Those people who do invest are already enthusiastic holders of UK equities, helping provide the capital for companies to expand. But all too often they have been left out of initial public offerings on the stock market, only able to get a small foot in the door after institutional investors have taken their pickings. It’s important that they keep being pushed more towards the centre of future plans, through the FCA’s proposed reforms of the listings and prospectus regime.
What would also help simplify retail investing and encourage more people to take the plunge into the stock market is reducing the Lifetime ISA (LISA) penalty from 25% to 20%. The 25% penalty not only claws back the Government bonus to save, but also applies an additional 6.25% penalty based on the net amount invested. It would give investors more confidence to use this highly useful tax wrapper to climb onto the housing ladder or save for retirement with the knowledge that they won’t be penalised if their circumstances change.’’
