Will Labour scrap the British ISA?
Recent reports suggest that Rachel Reeves, the UK’s new Labour Party Chancellor, is set to scrap the British ISA proposed in the Spring Budget by the Conservatives.
The British ISA was designed by the Conservatives for the purpose of attracting investment into UK companies. From the outset the British ISA faced criticism from financial experts, and it may now be officially dropped by Labour.
It has been reported in the financial press this week that sources close to Labour believe the British ISA has overcomplicated the investment market. Industry insiders had speculated that the plan would be scrapped before the General Election, but this didn’t happen, it is now expected that it will be in the October Budget that this U-turn is announced.
The British ISA was introduced by the Conservative Government in March 2024. It offered savers an additional £5,000 allowance to invest in UK stocks, raising the annual tax-free ISA limit from £20,000 to £25,000.
From the offset the idea was met with widespread scepticism with investment industry experts suggesting that the idea was a gimmick doomed to fail in its objective of boosting investment in UK Plc. Many believe that the new government deserves praise for ditching what was an ill-conceived idea, and experts hope that the new Government will take a more sensible, long-term approach to ISA reform.
At the time of writing the Treasury has refrained from confirming any immediate decisions. All we know at present is that the Labour Government have commented “we will provide further information on its plans for the British ISA in due course.” In the meantime, we will continue to navigate the complex ISA landscape and await the financial community’s relief when it is announced that the idea of the British ISA is abandoned.
Matt King, RPGCC’s Financial Services Director added “Here in the UK there is a considerable amount of money invested in cash ISAs with relatively low interest rates. If there was a solution that saw this money invested in longer-term investments this would offer a greater benefit to the UK economy generally, acting in this way would not require the additional extra allowance which has been created and now potentially removed. What we need to happen is to see the whole ISA landscape simplified. It’s complex and is often difficult for savers to navigate.
Almost daily we are asked questions like, “can I have more than one ISA”, “can I transfer my ISA”, “can I have a cash and a stocks and shares ISA” there is lots of confusion around the products with conflicting advice. Across the industry IFAs would like to see the merging of cash and stocks and shares ISAs as well as the introduction of a single ISA product that increases the allowance to £25,000. This alone would simplify a current complex system and naturally drive investment into UK companies.
We await the October Budget to see if the British ISA is indeed consigned to history and at the same time we wait for the announcement on ISA simplification. My hope is that the Labour Party’s focus will shift to making ISAs easier to navigate and this in turn will encourage more people to invest and boost the UK economy”.
If you would like to speak to our Financial Services team about your ISA products, or, in indeed any alternative investment product, contact us on 020 7870 9050 and we can schedule an introductory meeting.
