Plans for a British Isa have reportedly been scrapped by the Government even thought it insisted it would not do so only months ago.
Investors were set to receive £5,000, on top of their existing £20,000 tax-free allowance, to invest in London-listed stocks and boost UK businesses.
But now the Government is said to be planning to drop the account in a U-turn, over fears it could ‘complicate’ the market.
The plans were drawn up by the previous Conservative government during the spring Budget earlier this year
Labour said on the campaign trail that it had no plans to scrap the British Isa
The plans were drawn up by the previous Conservative government during the spring Budget earlier this year.
Labour said on the campaign trail that it had no plans to scrap the British Isa. But a Government source yesterday told the Financial Times: ‘We are not planning to complicate the Isa landscape even further.’
Investment leaders had warned the plans would confuse the already complex Isa system, and could discourage investors from utilising tax wrappers.
Shaun Moore, tax and financial planning expert at Quilter, said: ‘Labour’s reported scrapping of plans to create a British Isa is a sensible move… If the British Isa did see the light of day, it would have further muddied the water.
‘The British Isa was rife with issues and the proposals ran the risk of consumer confusion or poor outcomes.
‘For example, limiting the ability to transfer out of a British Isa to a different Isa may not be fully understood at the time of opening. Furthermore, the investment universe of a British Isa would be naturally limited.’
Meanwhile, Michael Summersgill, chief executive of investment platform AJ Bell, said: ‘The UK Isa was a political gimmick.
‘The new Government will hopefully take a more sensible approach to Isa reform, focused on simplification for the benefit of consumers.’
Ahead of the General Election, Labour promised that it had no plans to drop the British Isa.
Many City figures, on the other hand argue that more needs to be done to drive investment into UK companies.
Summersgill said changing the allowance to £25,000 would boost investment. Currently, savers can only invest up to £20,000 a year into Isa accounts.
Dan Moczulski, UK managing director of Etoro, said: ‘I think there is unanimous consensus that more needs to be done to stimulate investment in the UK, reinvigorate our capital markets and get more people investing as well as just saving.
‘The UK is a leader in financial services, yet when it comes to the number of households invested in capital markets, we are miles behind the US.’
A Treasury spokesman said: ‘No decisions have been made. The Government will provide further information in due course.’
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