New British ISA with £5k tax-free savings is delayed until after the election.
The “British ISA” announced in the Spring Budget is expected to be delayed until after the general election, most likely becoming available in April 2025.
The British ISA, which allows savers to invest £5,000 a year tax-free into the British stock market, will not be introduced in the new tax year after the Treasury concluded it would be too expensive.
Instead it will be subject to a three-month consultation, with no firm timeframe for the products hitting the market. Experts have said that the most likely time for the UK ISA to become available is April 2025, the start of the tax year after next.
While Hunt announced consultations with the view of establishing a further £5,000 ISA allowance for the UK investments, namely the Great British ISA, doubts have been cast as to whether this will see the light of day.
Given the consultation will close in June, it was always unlikely that we would see this new tax allowance be available with ISA providers until 6th April 2025, and very unlikely that this would be pre-election. There is however an election that will sit between consultation and implementation, and the Conservative Government retaining power is no guarantee.
From a financial planning perspective, it would be sensible to only use the more restrictive £5,000 allowance once the normal £20,000 ISA allowance has been used, with only one in seven using their full £20,000 allowance (Shepherds Friendly). I’d suggest that giving further tax benefits to those wealthier doesn’t align with Labours views, and while any Government would want to encourage UK investments, there are other ways to go about this – such as the Labour Government saying that the existing ISAs held should have say 50% UK exposure to keep their tax benefits.
While the £20,000 ISA allowance hasn’t increased since 2017, the ability to protect a further £20,000 every year of cash/investments from tax on income and growth is still a generous allowance, particularly when you consider allowances other countries offer. Given the above, an additional £5,000 allowance is not something I would anticipate a Labour Government looking to offer (and have said so themselves), and the current Government opening a consultation doesn’t mean that it will come into force, be an effective financial planning tool or even achieve the Government’s objectives of boosting UK business.
The good news is that if you have already used your ISA allowance of £20,000 there are other investment options that potentially give a greater level of tax benefits if you are looking to invest into smaller UK companies, and if you are a high earner that is also restricted on pension contributions this allows us to do some very efficient investment and tax planning.
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