The launch of Chancellor Jeremy Hunt’s flagship “UK ISA” is due to be delayed – and could even only come into effect after the next general election.
Mr Hunt announced the new ISA product during the Spring Budget, which would award savers an additional £5,000 allowance on top of the current £20,000, to invest in the shares of British companies.
However, the Treasury has announced the product will be subject to a three-month consultation with no specified timeline for its formal launch.
Some experts predict the earliest it’ll become available is April 2025, however, with no guarantee that Labour will be willing to take on the new policy, it may not come to fruition depending on the results of the next general election.
During last week’s Budget, Mr Hunt said: “After a consultation on its implementation, I will introduce a brand new British ISA which will allow an additional £5,000 annual investment for investments in UK equity with all the tax advantages of other ISAs.”
The Chancellor initially intended to introduce the new rule immediately but reconsidered after being advised that doing so would reduce his “headroom,” according to reports from the i.
Headroom refers to the amount by which the Government can increase spending or cut taxes whilst adhering to its own fiscal rules.
Subsequently, a consultation inviting views on how to “design and implement the UK ISA” is currently underway, and will run until June 6, 2024.
The Government will then need to respond and establish the policy. Additionally, more time will be required for savings providers to begin offering the product.
Therefore, it is unlikely that UK ISAs will be available before the general election expected in Autumn.
Lizzie Murray, partner and head of the private wealth team at Saffery, said after the Budget: “Ambitious policymakers may have been scrambling to see if the coming financial year might be doable for introducing a new ISA, given the economic landscape and the coming general election.
“However, the questions about how it will work in practice are too significant to forgo detailed consultation, so we’ll have to wait and see if it’s a realistic prospect for April 2025.”
Meanwhile, Michael Summersgill, chief executive at AJ Bell, pointed out the proposed product will only benefit a small number of people if enacted.
He said: “Increasing investment into UK companies is a laudable aim, but this ill-conceived, politically motivated decision will simply not achieve that objective.
“50 percent of the money our customers currently invest through their stocks and shares ISAs is invested into UK assets, so this new allowance will have no impact whatsoever on their investment behaviour.”
He added: “A tiny minority of people max out their £20,000 ISA allowance each year, but these are the only ones that will see any benefit from the additional British ISA allowance. In the context of the £2tn+ UK stock market, any additional investment generated by these investors through the British ISA will be a rounding error.
“For most people, the British ISA only adds an unwelcome complexity. People will now have another option to evaluate when deciding which ISA type is right for them.”
Rather than complicating ISAs, Mr Summersgill said the Government should instead be making it easier for people to invest by simplifying the ISA landscape.
He said: “AJ Bell is committed to campaigning for long-term simplification of the UK savings landscape.
“We remain convinced that stripping back this complexity and combining the best features of ISAs within a single ‘One ISA’ product would represent transformative, consumer-focused reform.”
