You remember when Jeremy Hunt announced the British ISA (Individual Savings Account) back in March 2024? £5,000 extra tax-free allowance for investing in British firms. Sounded great for maybe five minutes. Labour won that election in July and promptly threw the whole thing in the bin. British ISA was scrapped before it even launched. Probably for the best, to be honest.
What Is British ISA Anyway?
The British ISA plan was supposed to give savers an extra £5,000 on top of the usual £20,000 ISA allowance. But that £5,000 could only go into UK-listed stocks. London Stock Exchange stuff. British companies only.
Hunt’s idea was to funnel more money into UK businesses. The London market’s been struggling for years. Pension funds have pulled out about £54 billion since 2016, all going into global equities instead. British retail investors are following suit.
So Hunt thought, “Let’s bribe people to invest in UK companies with extra tax-free allowance.” Classic politician solution – throw money at the problem and hope it sticks.
The consultation launched in March and is supposed to run till June 6th. Then the election got called and everything went on hold. Labour said during the campaign they had “no plans to drop the British ISA.”
Spoiler: they dropped it.
Labour British ISA U-Turn
In September 2024, about two months after Labour won, the Financial Times reported the whole thing was dead. Government sources said, “We are not planning to complicate the ISA landscape even further.”
Proper U-turn from what they said pre-election. But honestly? Nearly everyone in the investment industry was relieved.
Michael Summersgill from AJ Bell called it “a political gimmick that was doomed to fail.” Said the new government deserved “huge credit for consigning this ill-conceived idea to the policy dustbin.”
Dan Olley at Hargreaves Lansdown was “pleased” they’d dropped it. Said, “Simplicity is key when it comes to getting people to start investing.”
Even Shaun Moore from Quilter said it was “rife with issues” and would cause “consumer confusion.”
Investment platforms were basically celebrating. Which tells you everything about how bad the idea was.
Why It Was Rubbish
First problem – it made ISAs even more complicated. We’ve already got Cash ISAs, Stocks and Shares ISAs, Lifetime ISAs, Innovative ISAs, and Junior ISAs. Adding another type was just confusing.
Most people don’t even understand the ones we’ve got. Three million people have £20,000+ in Cash ISAs but nothing in stocks and shares ISAs. They’re sat on cash earning bugger all when they could be investing.
Adding a British ISA on top would’ve made things worse. Now you’d need to track your £20,000 normal ISA allowance plus your £5,000 British ISA allowance separately. Which companies count as “British” for the British ISA? What if a British company moves headquarters abroad?
Total mess waiting to happen.
Second problem – limiting transfers out. The proposals said you might not be able to transfer British ISA money into a normal ISA easily. That’s a massive issue people wouldn’t understand when opening one.
The third problem – the investment universe was naturally limited. Only UK-listed companies. No American tech stocks. No European manufacturers. No emerging markets. Just whatever’s listed in London.
That’s quite restrictive when global diversification is supposed to be investing 101.
The Real Issue
Moore from Quilter nailed it: “The reality is, the UK has a cash savings problem and too much money is sitting in low-yielding Cash ISAs.”
That’s the actual problem. Not that people aren’t investing in British companies specifically. It’s that they’re not investing at all.
HMRC data shows around three million people maxing out Cash ISAs but not touching stocks and shares. That’s £60 billion sitting in cash earning maybe 4-5% if they’re lucky, when historically stocks return 7-10% long-term.
Getting that money invested – in anything, not just UK stocks – would be way more useful than creating another complicated ISA type.
Hargreaves Lansdown said 80% of trades on their platform last year were London markets anyway. British retail investors already back British companies. They didn’t need bribing with an extra £5,000 allowance.
What Labour Actually Did
The October 30, 2024, budget came and went. Rachel Reeves confirmed the ISA system wouldn’t change. No British ISA. No cuts to the £20,000 allowance (despite rumours she’d slash it to £10,000). Nothing changed at all.
Industry experts reckon Labour should focus on simplifying ISAs instead of adding new types. Suggestions include:
Merge the Cash ISA and Stocks and Shares ISA into one product. Just “an ISA”. Put cash or stocks in it, whatever you want, up to £20,000.
Have ONE ISA product instead of six different types. Open one ISA; use it how you need based on your life.
Increase the overall allowance to £25,000. It’s been £20,000 since 2017. Inflation’s eaten into that. Raising it might actually drive more money into UK companies naturally, without needing a separate British ISA.
Reduce the Lifetime ISA penalty from 25% to 20%. Currently, if you withdraw for anything except buying a first home or retirement, you lose 25%. That’s harsh and puts people off using them.
Simple changes that’d actually help rather than creating more confusion.
Where We’re At Now
It’s November 2025 now. The British ISA has been dead over a year. Nobody misses it.
The £20,000 ISA allowance stays the same. You can split it however you want across Cash ISA, Stocks and Shares, Lifetime ISA, whatever. No separate British ISA allowance complicating things.
If you want to invest in UK companies, just buy them in a normal Stocks and Shares ISA. No different from buying American or European stocks. All tax-free gains, no capital gains tax, and no income tax on dividends.
The “British” bit was irrelevant. You can already invest in British companies tax-free. Didn’t need a whole new ISA type for that.
The Cash ISA Rumours
There’s been chatter about Labour potentially cutting the Cash ISA allowance to push people into investing. Treasury supposedly considered capping it at £10,000, with the other £10,000 forced into stocks and shares.
That idea got shelved after backlash. But it wouldn’t surprise me if it comes back eventually. The government clearly wants people investing more and saving cash less.
Aberdeen research showed only 8% of UK adults’ wealth outside pensions is in investments. That’s the lowest of any G7 country. We’re a nation of cash savers, not investors.
Forcing the issue by cutting Cash ISA allowances would be controversial, though. Loads of people rely on accessible cash savings. Making them take investment risks they don’t want would cause uproar.
What You Should Actually Do
Ignore the British ISA stuff. It’s dead. Focus on using your £20,000 allowance sensibly.
If you’re keeping money for emergencies or short-term goals, a Cash ISA makes sense. Get the best rate you can find. Currently around 4.5-5% on fixed-rate Cash ISAs.
If you’re saving long-term – retirement, kids’ university, whatever – stocks and shares ISAs make way more sense. Yes, there’s risk. Yes, values go up and down. But over 10+ years, historically you’ll do better than cash.
Lifetime ISA is brilliant if you’re under 40 and buying a first home or saving for retirement. The government adds a 25% bonus. That’s free money. Just watch the penalties if you need to access it for other reasons.
Don’t overcomplicate it. The ISA system’s confusing enough already. British ISA would’ve made it worse. Thank god Labour binned it.
Just pick the ISA type that suits your goals, stick your £20,000 in, and forget about whatever new gimmick politicians dream up next year.
