'Plans for British ISA scrapped’ in Government u-turn

The tax-free product would have allowed people to invest up to £5,000 in UK companies.

The Government is reportedly set to ditch plans for a British ISA.

The product would have given people an extra £5,000 tax-free allowance that could be invested in UK equities on top of the existing £20,000 ISA allowance.

Labour initially said in the run-up to the election that it had no plans to scrap the ISA, but a Government official has reportedly told the Financial Times that it was “not planning to complicate the ISA landscape any further.”

It's worth noting that the Government has officially said no final decision has yet been made.

Government ‘deserves huge credit’ for scrapping British ISA

The product has long attracted fierce criticism from the investing industry, which has claimed that adding another ISA into the mix would only further complicate the market.

There are already five different ISAs available to savers and investors: Cash ISA, Stocks & Shares ISA, Innovative Finance ISA, Junior ISA and Lifetime ISA.

Responding to reports that the British ISA has been scrapped, Michael Summersgill, CEO of investment firm AJ Bell, said: “The ISA was a political gimmick that was doomed to fail in its objective of boosting investment in UK Plc.

“The new Government deserves huge credit for consigning this ill-conceived idea to the policy dustbin and will hopefully now take a more sensible, long-term approach to ISA reform than their predecessors, focused on simplification for the benefit of consumers.”

Summersgill added that the Government could further simplify the ISA market by merging Cash and Stocks and Shares ISAs.

“The benefits of simplification for consumers and the UK economy could be substantial. In particular, merging Cash ISAs and Stocks and Shares ISAs – the two most popular ISA products in the UK – would make it easier for those holding money in Cash ISAs to transition towards long-term investing."

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Most investors unaffected

While the loss of an additional tax-free allowance worth £5,000 a year would be a blow to some wealthier investors, the scrapping of the British ISA will likely have little impact on most people’s finances.

As it stands, everyone has a £20,000 annual ISA allowance, meaning a typical household could set aside £40,000 a year tax-free.

Throw in the fact you can set aside an additional £9,000 a year in your child’s Junior ISA, and it’s clear very few savers have the means to max out their full allowance.

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