Jasmine Birtles
Your money-making expert. Financial journalist, TV and radio personality.
Is a British Stocks & Shares ISA on the way? Here’s how it might work
Reading Time: 5 minutesChancellor Jeremy Hunt has signalled he may be on the brink of announcing a British ISA in his Spring Budget.
In this article we’re going to take a look at what a British ISA product could mean for UK investors. Keep on reading for all of the details, or click on a link to head straight to a specific section…
- What do we know about the British ISA?
- What has the Chancellor said about the British ISA?
- What’s the likelihood a British ISA will be announced?
- Stocks & Shares ISA: 3 need-to-knows for investors
What do we know about the British ISA?
The concept of a British ISA is nothing new. A number of lobby groups within the finance industry were calling for one in the months leading up to last year’s Autumn Statement.
In brief, a British ISA – or a British ‘Stocks & Shares’ ISA – would allow investors to buy UK-based stocks without having to pay tax on any gains. The theory being that a tax break on British stock purchases would give the UK stock market a boost.
While British stocks can, of course, already be held within a bog-standard Stocks and Shares ISA – meaning investors can already avoid income and capital gains tax on their returns – the current £20,000 annual allowance limits the amount of shares investors can purchase tax-free in any given tax year.
A British Stocks & Shares ISA could, in theory, be offered alongside the existing ISA allowance, meaning investors could be incentivised to put more of their capital towards UK stocks.
It’s also been suggested that shares held within a British Stocks & Shares ISA could dodge the 0.5% stamp duty fee that investors are charged when buying shares worth more than £10,000 (even if held within an ISA).
At the time of writing on Friday 9 February 2024, the FTSE 100 is down 1.6% year-to-date, while the FTSE 250 is down 2% over the same five-week period. So, given the UK’s share indices are looking less than stellar right now, many will argue that the next budget – set to take place on 6 March 2024 – provides a perfect opportunity to announce a tax break for investors happy to put their faith in UK stocks.
What has the Chancellor said about the British ISA?
On Thursday 8 February, Chancellor Jeremy Hunt gave his biggest hint yet that he may be on the verge of announcing a British ISA.
Speaking with a group of financial bigwigs in Central London, Hunt suggested that he would support something that would encourage UK investments. When pressed on whether he would announce something in his upcoming budget by lobby group, TheCity UK, he certainly didn’t make much of an effort to quell any speculation.
Hunt explained: ““So there’s a certain category of questions that I’m not really able to answer…
“Those are things that might appear in the budget. And that is one of them.”
Hunt continued: “Do I want to do things that mean that more UK capital is invested in our most promising companies? Absolutely. I think that something like a British ISA could be very good at that.”
The Chancellor also commented that he would support London becoming something like “Europe’s Nasdaq”, suggesting he was eager to make it easier for companies to list in the UK.
What’s the likelihood a British ISA will be announced?
Of course, politicians should be judged by what they do, and not by what they say!
Nevertheless, Hunt’s recent comments do suggest that his Government are looking for ways to boost investment in UK-listed companies. And given that the next Budget is likely to be this Government’s last for a while, there’s a good chance that Hunt and his colleagues are lining up a few ‘positive’ announcements.
Even if a British ISA isn’t announced next month, there is a possibility the Government will make the existing tax-free ISA allowance more generous from April onwards. After all, the current £20,000 limit hasn’t changed for five years after it was raised from £15,240 for the 2017/18 tax year.
So, if nothing else, investors on the wealthier end of the spectrum may hold hope that the ISA allowance will at least be increased for the upcoming 2024/25 tax year.
As with any Budget-related speculation right now, it’s a case of having to wait and see…
Stocks & Shares ISA: 3 need-to-knows for investors
Whether or not something resembling a British ISA will be announced next month, if you’re looking to make your investments tax-efficient then here are some useful need-to-knows about Stocks & Shares ISAs…
1. If you don’t use your annual allowance, you lose it.
The annual ISA allowance (£20,000 for 2023/24) is reset when a new tax year begins. This means that if you don’t use your full ISA allowance in any given tax year, you lose it – forever.
In other words, if you haven’t put a full £20,000 into an ISA before 5 April 2024, you won’t have another chance to do so. (Obviously if you’ve less than £20,000 to invest, then this deadline won’t have any relevance!)
2. Opening an ISA at the last minute is probably a bad idea.
While you may be keen to use up your ISA allowance, waiting until the very last minute is probably an unwise decision!
Here at Money Magpie we see press releases every year shouting about how many people scurry to open an ISA on the very last day of the tax year.
While some investors are indeed successful in opening an account on 5 April every year, it’s worth knowing that opening an ISA can take time – especially if you choose a provider that requires lots of forms of identification. In additional, leaving it until the last minute also increases the likelihood of acting in a rush – and nobody likes to make decisions in a hurry, particularly financial ones!
So, the message here is simple… if you’re planning to up your 2023/24 ISA allowance, it’s best to do so sooner rather than later! (It may be hard to believe but the next tax year begins in just eight weeks!)
3. The ISA allowance applies to all types of ISA
If you’re keen to open or max out your ISA allowance then do bear in mind that you can split your allowance across different types of ISA. This means you’re free to stash £15,000 into a Stocks & Shares ISA, and £5,000 in a Cash ISA within the same tax year.
What you can’t do, however, is exceed your total annual allowance across different types. So you can’t put £18,000 into a Stocks and Shares ISA, and £5,000 into a Cash ISA for example.
To learn more about the ins and outs of tax-efficient investing take a look at our comprehensive article that explains all you need to know about ISAs.
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