28 May 2024
If you are covering the news that a Labour government would proceed with plans for a British ISA, please find below a comment from Rachael Griffin, tax and financial planning expert at Quilter:
“While Labour has confirmed it plans to go ahead with a British ISA, should it come to power it has an opportunity to drastically improve it. The consultation for the British ISA is still ongoing, but it will be up to the party in power come 5th July to implement its introduction, and thus we want to see understanding in what is needed to make the product a success.
"The ISA is a simple idea, a tax efficient place to grow your wealth, however, with various additions over the years it has now become a confusing area of personal finance. Should it win the election, Labour must use those principles of simplicity when designing the British ISA.
“Current proposals run the risk of consumer confusion or poor outcomes – for example limiting the ability to transfer out of a British ISA to a different ISA may not be fully understood at the time of opening. Furthermore, the investment universe of a British ISA will be naturally limited, but more can be done to appeal to a wider set of investors, such as including cash and fixed income investments or lowering the minimum UK equity requirement. The closer the British ISA is aligned to the current Stocks and Shares ISA when it comes to investment vehicles permitted, the better.
“There is also the opportunity to consider other incentives to get people behind the product. Any incoming government could consider bringing in other tax reliefs, for example having an inheritance tax exemption, supplementing the income tax, dividend tax and capital gains tax exemptions ISAs already receive.
“Ultimately, so few people use their total ISA allowance, that an additional £5,000 to invest in UK companies is unlikely to scratch the surface, and will do very little to alleviate the pains the London stock market is going through just now. The reality is, the UK has a cash savings problem and too much money is sat in low yielding cash ISAs, doing very little to help them or the economy. Finding ways to get that money invested for the long-term would be far more beneficial.
“There are many possibilities to consider, but it is important simplicity and attractiveness of the idea are put first. The British ISA’s success hinges on its ability to serve the needs of a diverse investor base. The more people we get investing, both in the UK and more generally, the more the economy will naturally come to benefit.”
