The Labour government's reported plans to scrap the ‘British Isa’ have been dubbed a “sensible move”.
Proposed by previous chancellor Jeremy Hunt, the Isa would have given savers an additional £5,000 of tax-free investing allowance on top of their usual £20,000 Isa allowance.
Two people close to the process said Labour had abandoned the plans introduced by the previous Conservative administration, according to the Financial Times.
One government figure told the FT, the current administration had no plans to “complicate the Isa landscape even further”.
However, the Treasury insisted no final decisions had been made and that further information on the government’s plans for the British Isa would be provided “in due course”, according to the reports.
Unveiled at the Budget earlier this year (March 6), the British Isa was introduced to encourage savers to invest in UK assets.
Speaking at the time, Hunt said: “After a consultation on its implementation I will introduce a brand new British Isa which will allow an additional £5,000 annual investment for UK equities with all the other tax advantages of other Isas.
“This will be on top of existing Isas and will ensure UK savers can benefit from the most promising UK businesses as well as supporting those businesses with the capital to expand.”
AJ Bell, which was opposed to the idea from the start, said the government deserved “huge credit” for scrapping the “ill-conceived” idea.
Michael Summergill, chief executive of AJ Bell, said: “Merging cash and stocks and shares Isas is the obvious starting point, a reform that would make life easier for investors and would-be investors and could provide a significant boost to UK capital markets into the bargain. Over the longer-term, the government should consider whether the best features of the current Isa regime can be combined into a single Isa product.
“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.”
Shaun Moore, tax and financial planning expert at Quilter believed the British Isa was “rife with issues” and felt it was a “sensible move” for Labour to say goodbye to it.
He said: “The reality is, the UK has a cash savings problem and too much money is sitting in low yielding cash Isas, doing very little to help them or the economy.
“Finding ways to get that money invested for the long-term would be far more beneficial to the UK as a whole without the need for the creation of an extra allowance. The more people we get investing, both in the UK and more generally, the more the economy will naturally come to benefit."
James Carter, head of platform product policy at Fidelity agreed a new Isa would further complicate the system.
