Unveiling the New British ISA: Your Guide to the Additional £5,000 Tax-Free Allowance

by Paul Foster

As the new tax year begins there are exciting prospects for investors with the launch of the new British ISA, offering you an additional £5,000 tax free allowance. This fresh initiative aims to allow individuals to continue growing their wealth with significant tax benefits, and to encourage investment in UK. 

The British ISA has not yet been rolled out and will be subject to a process of consultation which will run until 6th June 2024. If approved, it will allow investment of an additional £5,000 annually in ‘UK equity’ with the same tax advantages of current ISAs.

The Importance of utilising ISAs

ISAs have long been a cornerstone of the UK’s savings and investment landscape, offering tax-efficient ways to build wealth. The proposal for the new British ISA builds upon this foundation by providing an additional avenue for tax-free growth, further incentivising individuals to save and invest for their future. The proposed £5,000 tax-free allowance in British ISA’s represents a significant expansion of the existing ISA framework. Here’s some things to consider; 

Advantages 

  1. Tax Efficiency: The obvious attraction to the new British ISA is its tax efficiency. By investing within the ISA wrapper, you can enjoy tax-free growth on your savings and investments, allowing your money to compound faster over time.
  2. Increased Investment in UK Shares: The British ISA will support investment in UK businesses, which the Government hopes will boost UK industries and support economic growth. Early plans suggest a focus on companies incorporated in the UK and either listed on a UK recognised stock exchange or trading on it.

Disadvantages

  1. Prevents Diversification of Assets: The main criticism around the British ISA is that it dictates what individuals can invest in.

When should we expect to see the launch of the new British ISA?

As mentioned earlier the British ISA is currently in a consultation period which will complete on 6 th June – The Government are looking at how to design and deliver the British ISA and are inviting responses to the consultation, until the deadline date.

When the consultation period ends, the Government will review responses and set out the final rules. Investment providers will also need time to adjust their platforms to facilitate a new product. 

According to investment platform AJ Bell, April 2025 is likely to be the earliest possible date it would be available to customers.