British Isa ‘doomed to fail’

The Treasury’s British Isa idea is “ill-conceived” and will not achieve its objective of encouraging more investment into UK companies, AJ Bell chief executive Michael Summersgill has warned.

Chancellor Jeremy Hunt announced that he would introduce a new British Isa, during his Spring Budget speech today (6 March).

Reacting to the announcement, Summersgill said increasing investment into UK companies is a “laudable aim”.

However, he his, “this politically motivated decision will simply not achieve that objective”.

“50% 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 continued.

In his speech, Hunt said the British Isa will come in the form of an extra £5,000 tax-free allowance to encourage UK retail investment. The existing Isa allowance is £20,000.

“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,” said Summersgill.

“In the context of the £2trn UK stock market, any additional investment generated by these investors through the British Isa will be a rounding error.”

He argued that, 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, the government should be making it easier for people to invest by simplifying the Isa landscape.”

In autumn last year, the Treasury laid out its much-trailed Isa simplification reforms in a document published on the day that Hunt made his Autumn Statement speech.

Among the changes, the government said it will allow multiple subscriptions to Isas of the same type every year from April 2024.

It will also allow partial transfers of Isa funds in-year between providers from April 2024.

Commenting on today’s announcement, Summersgill added: “Our research shows that complexity puts people off saving and investing for the long-term, so throwing another Isa in the mix, alongside the six others that already exist, will inevitably add to this problem.

“The aim is laudable, but the British Isa is simply the wrong way to achieve it. If the aim is to boost investment in UK companies, the answer lies elsewhere.

“For example, extending the existing Aim exemption from stamp duty and/or inheritance tax to a wider pool of UK assets would actually have a meaningful impact.”