The new British ISA; everything we know so far
There’s already a lot of debate about the new British ISA, which was announced by the Government in the 2024 Spring Statement. It’s hoped this new scheme will help increase investment for British businesses and boost the UK economy, but what does this new ISA mean for savers?
Here’s our handy guide on everything you need to know about the British ISA, what it would mean for the ISA allowance and when it’s likely to launch.
What is the British Individual Savings Account (ISA)?
This new form of ISA, officially known as the ‘UK ISA’, was announced in the Government’s Spring Budget and allows you to save and invest £5,000 tax free. It’s specifically designed to offer tax-free investment in the shares of UK businesses. The idea here is that by encouraging investment in UK equities, it will have a positive impact on the UK stock market and the economy.
Is this new ISA available now?
The British ISA isn’t available now, and won’t be within the 2023/24 tax year. In fact, the launch date is yet to be announced but it’s rumoured to be later in 2024 or early 2025. There’s currently a consultation period to determine the finer details such as how the product will work and types of investments it will cover. This consultation period is expected to end on 6th June. It’s likely that this ISA will be very similar to existing ISAs but more will be known once the consultation period is over.
What is the British ISA allowance?
The British ISA allowance is an extra £5,000 on top of the current £20,000 ISA allowance that each person over 18 is entitled to. So if you reach your £20,000 ISA allowance limit within the tax year, you can save an extra £5,000 tax free through the British ISA.
For more information about tax free savings and the maximum ISA allowance, you can visit our helpful guide on how the ISA allowance works here.
Which ‘British businesses’ will be invested in through the British ISA?
This is another thing yet to be confirmed and forms part of the current consultation. It’s likely that qualifying businesses would either be incorporated or listed in the UK but potentially trade internationally. There’s also talk of the British ISA including investment in government bonds but more will be known once the consultation period is over.
Will the same ISA rules apply to the British ISA?
This is also yet to be confirmed. There will be new ISA rules introduced for the 2024/25 tax year, including the ability for savers to pay into more than one ISA of the same type and transfer partial amounts between different ISAs. It’s not yet clear whether there’ll be the same flexibility for the British ISA.
Why has the Government launched the British ISA?
The Government has launched the British ISA to boost the economy, but also to give savers an extra £5,000 of tax efficient savings. This new type of ISA, when it’s launched, will encourage investment in UK businesses, which the Government hopes will boost UK industries and support economic growth.
This is similar to an Innovative Finance ISA (IFISA), which allows you to earn tax-free interest on peer-to-peer (P2P) lending. P2P lending allows account holders to offer their savings as loans to small businesses and individuals. The loans are then paid back with tax-free interest on top.
Could I choose a British ISA as my main tax-free saving account?
As with anything, choosing your savings account is a personal choice and depends on a few different factors such as interest rates and whether or not you want to access your savings at any time. What we do know about the British ISA is that it is intended as an option for those who have exceeded their £20,000 ISA allowance, giving them an extra £5,000.