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Wednesday 24th April 2024

When can I open a Great British ISA or UK ISA?   

Mouthy Money Your Questions Answered panelist, Laith Khalaf, answers a reader’s question on the new Great British ISA. 


Q. When will I be able to start saving into the Great British ISA and can anyone open one? 

A. The introduction of a new British ISA was announced in the 2024 Spring Budget, in a bid to revive the UK’s flagging stock market.

The ‘UK ISA’, as it has been dubbed, will only allow money to be invested in UK stocks and bonds.  

Investors will have an extra £5,000 ISA allowance to invest in UK stocks with the new ISA, on top of the £20,000 they can invest elsewhere. A bigger ISA allowance is definitely welcome, as the maximum allowance has been frozen since 2017.

But it would have been much better if the Government had simply raised the standard stocks and shares ISA allowance rather than introducing a brand-new account.  

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The British ISA will be the seventh type of ISA available on the market, so it’s an added layer of complexity investors don’t need. It also sets a worrying precedent of the government dictating where investors can put their money if they want to protect it from tax.  

What happens, for example, when the government wants to encourage more investment in something like private equity, renewable energy, or defence companies? Do we get new ISAs for those too?

Perhaps more concerning is the prospect that instead of increasing the ISA allowance, they may start encroaching on the existing ISA allowance with restrictions on where it could be invested.  

The bottom line is investors should be able to invest where they want, based on their risk profile and where they see the best opportunities.  

The UK ISA adds complexity to running an investment portfolio because it’s another limiting factor to consider.

Fast forward five years and an investor might want to dial down their UK exposure, but the UK ISA restrictions could mean they are left with the choice of either moving investments out of the tax shelter to invest them elsewhere, or abandoning their investment plans in the interests of tax efficiency.  

In practice, it’s also of course already possible to invest in UK stocks within the existing stocks and shares ISA. The high weighting ISA investors already have in UK assets also suggests the UK ISA won’t be successful in creating a seismic shift towards UK shares. ISA savers would have invested in them anyway.  

It’s also only likely to come into play for investors who have maxed out their £20,000 standard allowance and there was around a million of them at the last count. On the heroic assumptions all of them invest £5,000 into a UK ISA, that’s an extra £5 billion or so going into UK stocks each year. It sounds like a lot, but the value of the FTSE All Share is currently £2.3 trillion so the UK ISA won’t touch the sides. 

There’s also a question of timing as it isn’t going to be introduced this April. There’s a consultation on how to implement it, as there are plenty of design challenges to overcome.

The consultation closes in June and given the proximity of a general election and the fact the Labour party is committed to ISA simplification, the UK ISA may never hit the shelves.  

Laith Khalaf started his career in 2001, after studying philosophy at Cambridge University. He’s worked in a variety of roles across pensions and investments, covering both the DIY and the advised sides of the business.

In 2007, he began to focus on research and analysis, and has since become a leading industry commentator, as well as a regular contributor to the financial pages of the national press. He’s a frequent guest on TV and radio, and for several years provided daily business bulletins on LBC. 

Photo by Deeana Arts: https://www.pexels.com/photo/man-driving-vehicle-near-tree-1563678/

Rebecca Goodman

Award-winning freelance journalist with a decade of experience working for online and print publications in the consumer sector.

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