The New British ISA – What You Need To Know

As announced in the latest budget, Jeremy Hunt has confirmed that the government will create a tax-free British ISA as part of efforts to “ensure British savers can benefit from the growth of the most promising UK businesses, as well as supporting those businesses with the capital to expand.”

Where the new ISA differentiates from the previous ISA, is that the new £5,000 allowance is separate from the usual annual limit. This means, potentially, that an individual’s allowance could rise to £25,000 a year if used decorously. The new allowance, in addition to the existing ISA allowance, will provide a new tax-free savings opportunity for people to invest in UK companies, without having to pay capital gains tax on any money made on those investments.

Alongside this, the UK ISA will also build on the government’s Mansion House and Autumn Statement 2023 measures to reform the pensions market to unlock investment into high growth sectors and improve the competitiveness of the UK as a listing destination.

The main objective for the new ISA changes is to support a ‘culture of investment in the UK’ and to give people the opportunity to invest and benefit from the UK’s ‘vibrant capital markets’ and ‘high-growth companies’. It will also support the wider work being done to increase the capital available for UK businesses and to support the competitiveness of UK equity capital markets.

Glen Bastick, Chartered Financial Planner at Finura, explains: “ISAs are a cornerstone of financial planning and, whilst there are practical questions still to be answered, the additional £5k allowance should be a welcomed addition, especially in times where fiscal drag has been in the spotlight. It is proposed the additional £5k will be a standalone allowance investing 100% in UK assets. For most of our client portfolios, this would only be a marginal increase in total UK exposure. Let’s also not forget, if you do not wish to invest 20% in the UK, you simply forgo the allowance.”

Consultation documents are currently inviting views on how to design and implement the UK ISA between 6^th March 2024 and 6^th June 6, 2024. It has also been mooted that the implementation of the British ISA is not expected to take place until after the general election, most likely becoming available in April 2025.

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Source: Techlink