- British Isa plans part of the push to support UK stocks
- The new allowance will be on top of the existing £20,000 allowance
Investors will have a dedicated tax-free individual savings account (Isa) allowance for UK shares, under plans announced in today’s Spring Budget by chancellor Jeremy Hunt. The measure is meant to entice investors to allocate more to UK stocks.
The UK Isa will offer a tax-free annual Isa allowance of £5,000 to invest in UK equities, on top of the existing annual £20,000 allowance. This will be introduced after a consultation. The same tax advantages will apply, meaning that assets within the Isa will be sheltered from capital gains and dividend taxes.
It is unclear as to what would qualify for the new Isa but consultation documents suggested it could include investment trusts and open-ended funds that predominantly invest in British companies, although this – the suggested threshold was 75 per cent of assets – would be difficult to police. A threshold of 75 per cent in UK assets has been mooted in the consultation.
A British Isa will not necessarily solve the woes of the UK stock market, but it could help. Darius McDermott, managing director at Chelsea Financial Services, welcomed the move: “Allowing people to invest up to £5,000, tax-free every year in UK assets – on top of the existing allowance – is also a great way to help support our savers on their long-term investment journeys.” But he also called on the government to do more to support UK-listed companies.
Mike Ambery, retirement savings director at Standard Life, said that “the big question is whether today’s incentive will be enough to encourage people to invest at home”, with rising interest rates making cash more attractive and other markets, especially the US, performing strongly in recent years.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said that “DIY investors have an important role to play” in improving the liquidity of the London stock market, “especially at the small and mid-cap end”.
Bolstering British businesses and domestic investment has been a focus for the chancellor in the past few months, as he tries to stimulate the country’s economy without deploying measures that could be inflationary. A push to encourage pension funds to invest more in British companies has been part of this effort.
Rumours about the introduction of a British Isa first spread last year before Hunt delivered his Autumn Statement in November. Instead, the government only introduced measures to make Isas more flexible at that time, including allowing partial transfers between providers and letting people pay into multiple Isas of the same type during the same tax year.
