What happened to the British ISA?

And how you can still invest in the UK equities.

Plans for a new British ISA, as laid out by former Chancellor of the Exchequer, Jeremy Hunt, have reportedly been scrapped under the new Labour Government.

Unveiled earlier this year as part of the 2024 Spring Budget, it was suggested a British ISA could increase the flow of capital into domestic markets by generating more opportunities for people to invest tax-free in UK assets.

However, the idea has drawn criticism for overcomplicating the investing process.

“The British ISA was rife with issues and the proposals ran the risk of consumer confusion or poor outcomes,” said Shaun Moore, Tax and Financial Planning Expert at wealth management company, Quilter.

This sentiment is echoed by Dan Olley, Chief Executive Officer at Hargreaves Lansdown, who said the savings and investment platform was “pleased” the Government won’t be pursuing plans for a British ISA as “simplicity is key when it comes to getting people to start investing”.

“Our data clearly shows that British retail investors are already enthusiastic backers of British companies,” Olley added, revealing that, of the equities held on the Hargreaves Lansdown platform, 80% of trades in the past year were on the London markets.

How to invest in the UK equities

Those eager to invest in the UK market can continue to do so using a stocks and shares ISA, with any gains automatically exempt from Capital Gains Tax (CGT) and Income Tax.

If you opt for a self-select stocks and shares ISA, you’ll be responsible for choosing your investments and, with careful research, you can purchase UK equities. Alternatively, if you have a fund or account manager oversee your portfolio, you can ask them to invest your money in UK stocks.

However, as is always the case with investing, it’s important to remember your capital is at risk and returns aren’t guaranteed. Past performance is never indicative of future returns and it’s possible your investment could lose value. If in doubt, consider seeking expert advice.

Will there be further changes to ISAs?

With the current Chancellor of the Exchequer, Rachel Reeves, set to deliver the Autumn Budget on 30 October 2024, further changes to ISAs can’t be ruled out.

“While small changes would be welcome, the Government needs to be aware of major reforms and changes that could end up disincentivising investment at a time when more people need to increase their financial resilience,” said Susannah Streeter, Head of Money and Markets at Hargreaves Lansdown.

Alongside maintaining tax-free allowances, Streeter called for the Lifetime ISA (LISA) penalty to be reduced from 25% to 20%.

“The 25% penalty not only claws back the Government bonus, but also applies an additional 6.25% penalty based on the net amount invested,” she explained.

According to Streeter, knowing they won’t be penalised if circumstances change would give consumers “more confidence to use this highly useful tax wrapper to climb onto the housing ladder or save for retirement”.

For more information, visit our dedicated Lifetime ISA chart.