The Labor government is expected to abandon plans for a ‘British Isa’, a plan initially proposed by the previous Conservative government to encourage investment in British shares.
The move comes amid concerns that the initiative would complicate the individual savings account (Isa) market rather than effectively support UK equities.
The ‘UK Isa’ was announced by former Chancellor Jeremy Hunt in his March Budget as a measure to promote investment in domestic shares, offering a tax-free allowance of up to £5,000 worth of UK shares on top of the existing £20,000 Isa allowance. The proposal was aimed at addressing concerns about the valuation gap between UK and US listed companies and the relatively low level of private equity investment on the London Stock Exchange.
However, the policy was criticized by industry players who claimed it would overcomplicate the investment landscape. Leading DIY investment platforms, including AJ Bell and Hargreaves Lansdown, raised concerns that the ‘British Isa’ could deter potential investors from using Isas due to its added complexity. Reports on the government’s decision to scrap the policy were first published by the Financial Times.
Michael Summersgill, CEO of AJ Bell, welcomed the decision, saying: “The UK Isa was a political gimmick that was doomed to fail in its aim of boosting investment in UK plc. The new government deserves much credit for throwing this ill-conceived idea into the policy dustbin and will now hopefully take a more sensible, long-term approach to ISA reforms than their predecessors, focused on simplification for the benefit of consumers.”
Summersgill pointed to data from HM Revenue & Customs showing that three million people have invested £20,000 or more in cash Isas, but have no investments in stocks and shares Isas. He suggested that converting even half of this money into shares could generate more than £30 billion in investment for British companies. AJ Bell is calling for cash and shares Isas to be merged into a simpler, unified plan, encouraging millions of money savers to consider share investments.
Dan Olley, CEO of Hargreaves Lansdown, also praised the government’s decision, highlighting the importance of simplicity in encouraging people to start investing. “We are happy that the government is not pursuing this, because simplicity is key when it comes to getting people started investing. The UK Isa would have increased complexity without delivering real benefit to many,” Olley said.
He further emphasized the importance of starting investments early to benefit from compound growth, noting that many people lack the confidence or time to invest, which remains a significant challenge.
Despite reports suggesting the ‘British Isa’ would be scrapped, a Treasury spokesperson claimed no final decisions have yet been made: “The government will provide further information on its plans for the British Isa in due course.”
The decision to drop the ‘UK Isa’ reflects a wider move towards simplifying financial products and encouraging long-term investment in UK businesses. Industry leaders and investment platforms are hopeful that the Labor government will implement Isa reforms that prioritize consumer benefits and accessibility, promoting an easier route to investment in the UK market.