One of the eye opening announcements from the budget on 6 March was the confirmation of creation of the British ISA.
Chancellor Jeremy Hunt, after months of speculation, confirmed the new ISA after consulting with “more than 200 representatives from the City and high growth sectors”.
Details still need to be finalised with consultation on the ISA’s scope running till 6 June 2024.
At the moment, every UK resident can place up to £20,000 per year into an ISA or across multiple different ISAs which include:
- Cash ISA
- Stocks & Shares ISA
- Innovative Finance ISA
- Lifetime ISA (LISA) (up to £4,000 per year)
- Junior ISA (up to £9,000 per year)
Under this new announcement, an investor would be able to add another £5,000 to a British ISA in the tax year after they have utilised their £20,000 allowance elsewhere.
At Three Counties, we’re financial planners, so naturally we have some thoughts on this:
Positives
- The £20,000 limit has not increased for several years. Any help to increase tax efficiency of investments is a good thing. Any growth or income generated within a British ISA would be free of tax
- It will also likely offer the flexibility of most ISAs where investors can withdraw funds or income at any time. This contrasts to a wrapper like a pension where you can access from age 55 at the earliest.
- Although focused on the British side of things it would offer a relatively diverse range of investments
- It is not restricted to equities (company shares) only – you can invest to suit your attitude towards risk
- Could generate higher investment into British companies – potentially improving the economy
To Consider
- By its nature, since it offers only British based assets, investments into this wrapper will not be considered geographically diverse. The UK stock market is around 4.1% of total world equity market value – if UK markets suffer a downturn that will be felt heavily
- This will only benefit those who can top up their ISAs over £20,000
- It offers no relief like a pension or a LISA
- It could be considered that a £5,000 limit is not enough to help those planning their retirements and falls short much needed assistances in this area.
As financial planners, we will add this to the potential tools to use towards our clients’ long term planning needs. One of the key services we offer is keeping up to date with changes in legalisation and how they can help you reach your goals.
We await the details of the British ISA eagerly.
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