One of the many well-trailed announcements in the Spring Budget was the launch of a UK ISA. However, both its arrival and interest may be uncertain.
Alongside the Budget, the Treasury published a consultation paper on a possible fifth ISA variant, the UK ISA. To quote the paper, the rationale behind the UK ISA is “to give people the opportunity to invest and benefit from the UK’s vibrant capital markets and high-growth companies”.
What the new ISA will look like is unclear at present:
- The maximum contribution is set at £5,000 per tax year, in addition to the current £20,000 general ISA limit. By an odd coincidence, that general limit would now be a little over £25,000 had it been index-linked since its last increase in April 2017.
- Investments could include shares in UK-registered and -listed companies, corporate bonds issued by those companies, and UK government bonds and collective funds (e.g. unit trusts). Similar to the Personal Equity Plans (PEPs) launched in 1988, the government may require at least 75% of collective fund holdings to be in UK companies.
- Holdings of cash would be restricted, with possible disincentives such as tax levied on any interest received – again similarly to PEPs.
- To maintain the UK focus of the new plan, transfers out would be limited to other UK ISAs. The government is undecided on transfers in and is seeking views: they could be banned or unrestricted.
- Whereas the one-ISA-of-each-type-each-year has at last been abandoned for general ISAs, the consultation paper suggests that it could reappear for the UK ISA because it “could be simpler for investors…[and] also lower the risks of investors subscribing over the UK ISA limit”.
The latest HMRC data show that…
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