The government have announced they’re planning to launch a new ISA. It’s called the ‘UK ISA’, though you might have heard it called the ‘British ISA’ by the media.
The new UK ISA will have an additional £5,000 allowance, which is on top of the existing £20,000 allowance across other types of ISAs.
The goal is to encourage individuals to invest in UK assets. The new UK ISA is part of the government’s wider plan to drive a bigger savings and investing culture across the country, increase capital available to businesses, and drive more interest in the UK stock market.
The government has indicated it might restrict investments in the new British ISA to UK stocks and shares, funds and trusts that have at least 75% of their assets in UK-listed companies, or bonds of UK-listed companies and gilts.
When will the UK ISA launch?
The government is holding a three-month consultation with ISA managers, such as AJ Bell, until 6 June 2024. It will then be in a better position to say when exactly the UK ISA will launch.
What can I invest in with the UK ISA?
As the name implies, the government has created the new UK ISA to hold UK investments. The government has yet to decide exactly what qualifies for inclusion, but the consultation paper provides some clues.
It suggests one approach is to allow you to invest in ‘eligible’ companies – namely those with shares trading on the London Stock Exchange (Main Market and AIM), Aquis Stock Exchange or the Cboe Europe exchange.
Funds and investment trusts will quality for the UK ISA too. But there will be restrictions – the government says one option is to allow only funds or investment trusts with at least 75% of the value of their portfolio in the ‘eligible’ companies mentioned above.
As the government is eager to support corporate growth wherever possible, it has suggested allowing certain corporate bonds in the UK ISA. Bonds are a way for investors to lend companies money. The government has proposed to let corporate bonds issued by ISA-eligible companies sit inside the account.
Gilts (UK government bonds) may be eligible for the UK ISA too. These fixed-income products help to support the UK economy by financing public services, among other things.
Interested in UK markets?
Check out our dedicated investment research page on the FTSE 100 for daily UK market updates, share risers and fallers, and interactive charts for comparing data.
Can I hold cash in a British ISA?
The UK ISA isn’t designed to be a home for cash. While you’ll need to add cash to fund your investments, the government has indicated it doesn’t want cash sitting untouched in the account for a long time.
That’s why it’s looking at options to disincentivise people from holding cash long-term in the UK ISA – such as taxing cash balances in the account or not allowing interest on cash.
Can I use the UK ISA if I’ve already got another type of ISA?
Yes, you can.
The current system lets you pay in up to £20,000 each tax year across all types of adult ISAs: Stocks and shares ISA, Lifetime ISA, Cash ISA and Innovative Finance ISA (though you can only contribute £4,000 of this amount to a Lifetime ISA each tax year). Under 18s can have a Junior ISA, which has a £9,000 allowance.
The launch of the UK ISA will effectively increase the maximum you can contribute each tax year across all ISA accounts to £25,000, although only £5,000 of that can go into the UK ISA. It doesn’t mean you can put £25,000 into a Stocks and shares ISA, for example.
Disclaimer: The value of investments can go down as well as up and you may get back less than you originally invested. Past performance is not a guide to future performance and some investments need to be held for the long term. Tax treatment depends on your individual circumstances and rules may change. ISA rules apply. These articles are for information purposes only and are not a personal recommendation or advice.
The ISA allowance is the maximum you can put into your individual saving accounts per tax year.
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