Chancellor Jeremy Hunt has announced a boost to the amount people can save and invest tax-free, as he launched a new ISA allowance today.
The British ISA will see savers benefit from an extra £5,000 allowance per year, for investments in UK equity.
The new British ISA will allow people to invest up to £5,000 more tax-free each year, in UK assets, with this allowance being launched on top of the existing £20,000 ISA annual allowance.
The Treasury said it would grow the UK economy, reward investors, and support British business.
Mr 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 investments in UK equity with all the tax advantages of other ISAs.
“This will be on top of the existing Isa allowances and ensure that British savers can benefit from the growth of the most promising UK businesses as well as supporting them with the capital to help them expand.”
There are currently four types of ISA:
- Cash ISAs
- Stocks and shares ISAs
- Innovative finance ISAs
- Lifetime ISAs (limit of £4,000 per year)
Steven Cameron, Pensions Director at Aegon said the new British ISA would appeal to people who currently max out their ISA limits, providing scope for an extra £5,000 tax-free saving.
"It will also offer transparency, appealing to those who wish to be certain their investment is staying within the UK," he said.
"It will be important the forthcoming consultation creates an unambiguous definition of what qualifies as a UK investment within a ‘British ISA’.
“Investors should however be mindful about putting all their ‘eggs in one basket’.
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"Diversifying across different asset types and geographical locations can be an important way of managing investment risk, something which should be emphasised to potential investors.
“The creation of the British ISA comes alongside a push to get UK defined contribution pension schemes to invest more in the UK, including in private assets.
"The Chancellor clearly wants to take every opportunity to use all types of savings and investments to boost UK economic growth.”
Mike Ambery, Retirement Savings Director at Standard Life, part of Phoenix Group said: “ISAs represent a significant pool of savings and the Chancellor is hoping he can encourage people to buy British.
"The big question is whether today’s incentive will be enough to encourage people to invest at home."