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"Nice tax perk for the already very wealthy" - IFAs divided on British ISA

ended 06. March 2024

The Chancellor has just confirmed the launch of the British ISA, giving people an additional £5k tax-free allowance to invest exclusively in UK equities. Newspage asked IFAs and wealth managers for their views, below. One cautioned that “if it incentivises investment in FTSE-listed companies, it's not really a Great British ISA at all, more of an international one”, but another welcomed the launch: “Being able to shelter a further £5,000 from the tax man is a positive move.” A third said simply: “it's a nice tax perk for the already very wealthy”.

8 responses from the Newspage community

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Paul Denley
CEO at Oakham Wealth Management
The motivation for the Government to encourage investment in the UK via a British ISA is likely to stem from the fact that the UK has been unloved by international and domestic investors in recent years, with a gradual slide in valuations since 2016. The UK equity market now trades on a discount of more than 40% to the US and around a 20% discount to Europe. However, considering the FTSE 100, the ambition is somewhat illusory given that the index is made up of international companies, deriving around 75% of their revenues from overseas. As ever, the devil is in the detail. How will "British" be defined? Will we be allowed to invest in a UK fund, ETF, or Investment Trust that also invests in US stocks, for example? Presumably, these wrinkles will be ironed out in the consultation. Despite all of this, we welcome more ISA provision, given that that total allowance has been frozen since 2017.
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Daniel Wiltshire
Actuary & IFA at Wiltshire Wealth
Those with enough money to use an additional £5k ISA allowance will likely reduce UK exposure in their normal ISA, pensions and other investment portfolios to maintain the same overall allocation. As a result, I expect the British ISA to have only a very minor effect on investment in UK companies. But it's a nice tax perk for the already very wealthy.
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Samuel Mather-Holgate
Independent Financial Adviser at Mather and Murray Financial
The proof will be in the pudding, as ever. However, if it incentivises investment in FTSE-listed companies, it's not really a Great British ISA at all, more of an international one. There are probably more tax-efficient investments, like VCTs and EISs, if investors want to put their money in new, higher growth companies, that are starting in the UK. The idea seems high on presentation but low on substance.
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Wes Wilkes
CEO at IronMarket Wealth
We still don’t know how they will define UK/British investments, so that needs some clarification. Adding this allowance to the existing £20,000 ISA allowance will likely attract a good amount of savings and investment, which, overall, is good news for investors and good news for the UK markets.
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Ross Lacey
Director & Independent Financial Adviser at Fairview Financial Management
An extra £5k ISA allowance is a positive, but restricting it to investments in direct UK equities might encourage people to take on stock specific risk, alongside having too much concentration in the UK. There are already incentives like VCTs, EIS and SEIS that encourage investment into UK companies, with more attractive tax benefits, albeit a higher level of risk.
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Riz Malik
Independent Financial Adviser at R3 Wealth
And so the British ISA is born. The extra allowance certainly means that it should be part of a financial planning conversation but limiting yourself to UK equities might be an issue for some.
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Joshua Gerstler
Chartered Financial Planner at The Orchard Practice
I am pleased to see that the ISA allowance has been increased by £5,000 with the introduction of the British ISA, allowing people to invest £25,000 into ISAs tax-free each year. For most people, a global equity portfolio is better than a British-only equity portfolio. However, being able to shelter a further £5,000 from the tax man is a positive move.
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Graham Wells
Founder and Financial Coach at GroWiser Financial Coaching
The additional ISA allowance will be attractive to wealther individuals who need more than the existing £20k limit. Care must still be taken to ensure a properly diversified porfolio that's aligned with personal objectives and risk profile. But with some creativity, this provides an opportunity to grow tax-free wealth, whilst boosting investment in UK businesses. It'll be interesting to see the detail of what investments qualify for this new type of ISA.