British ISAs

Invest in UK businesses with the new British ISA

A new type of ISA was announced during the Spring Budget, so here's everything you need to know before it becomes available

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Last updated
April 21st, 2024

What is a British ISA?

A British ISA - individual savings account - is a new way to invest in UK companies without paying tax on the interest or returns. The new ISA was announced during the Spring Budget by chancellor, Jeremy Hunt. He revealed plans to reform the ISA system and encourage more people to invest in UK assets. 

It includes a £5,000 ISA allowance and this will be on top of the existing ISA allowance of £20,000. The chancellor commented that this ISA would give British savers the opportunity to benefit from the growth of UK businesses, and support them so they can continue to expand. 

Further details about this ISA will be shared in the coming months, and this page will be updated as soon as we find out more information. 

There are plans to reform the ISA system and encourage more people to invest in UK assets."

Who can open a British ISA?

The exact details about who can open a British ISA haven’t been confirmed yet, but as it involves investing it should follow similar rules to a stocks and shares ISA

This means if you are aged 18 or over and a UK resident, you could be eligible for a British ISA.

What are the different types of ISAs?

Cash ISA

A cash ISA allows you to save money without paying any tax on the interest earned. Similar to a savings account, there are also many different types of cash ISAs, from fixed-rate to easy access.

Stocks and shares ISAs

A stocks and shares ISA is a tax-efficient way to invest. This is different to a cash ISA as it doesn’t hold savings in cash, instead it allows you to invest in a range of assets, including stocks and bonds. It’s important to remember that with investing, your capital is at risk and you might get back less than you put in.

Innovative finance ISA

An innovative finance ISA enables you to earn tax-free interest on  peer-to-peer (P2P) lending platforms instead of cash or stocks. Peer-to-peer lending is when investors are paired with individuals or businesses, but there are risks involved as returns are never guaranteed. Plus, the money is not protected by the Financial Services Compensation Scheme if the platforms go bust.

Lifetime ISAs

A lifetime ISA is a type of savings account that helps people to save for their first home or retirement. The lifetime ISA limit is £4,000 and is part of the £20,000 ISA allowance. If a saver puts the maximum amount into a lifetime ISA each year, the government adds a 25% bonus which could be up to £1,000 every year. However, there are certain rules with this ISA, so read all the terms and conditions before saving.

What are the different types of ISAs?

Cash ISA

A cash ISA allows you to save money without paying any tax on the interest earned. Similar to a savings account, there are also many different types of cash ISAs, from fixed-rate to easy access.

Stocks and shares ISAs

A stocks and shares ISA is a tax-efficient way to invest. This is different to a cash ISA as it doesn’t hold savings in cash, instead it allows you to invest in a range of assets, including stocks and bonds. It’s important to remember that with investing, your capital is at risk and you might get back less than you put in.

Innovative finance ISA

An innovative finance ISA enables you to earn tax-free interest on  peer-to-peer (P2P) lending platforms instead of cash or stocks. Peer-to-peer lending is when investors are paired with individuals or businesses, but there are risks involved as returns are never guaranteed. Plus, the money is not protected by the Financial Services Compensation Scheme if the platforms go bust.

Lifetime ISAs

A lifetime ISA is a type of savings account that helps people to save for their first home or retirement. The lifetime ISA limit is £4,000 and is part of the £20,000 ISA allowance. If a saver puts the maximum amount into a lifetime ISA each year, the government adds a 25% bonus which could be up to £1,000 every year. However, there are certain rules with this ISA, so read all the terms and conditions before saving.

How does the British ISA compare to a stocks and shares ISA?

The British ISA is still undergoing a consultation process, which should run until June, so the exact details of how it’ll work are very much to be confirmed. That being said, it doesn’t look like it will be too different from the current stocks and shares ISA. 

Currently, you can invest in UK companies using a stocks and shares ISA so this isn’t where you’ll find any differences. The main headline is that you’ll be given an extra £5,000 tax-free ISA allowance with the British ISA. So, for those that have already maxed out the £20,000 allowance, it opens up some more investment opportunities.

The British ISA was a surprise for savers. Although it still needs to go through a consultation process, it’s a promising addition to the ISA portfolio as it supports businesses in the UK. Plus, the extra £5,000 is encouraging as the allowance hasn’t increased since 2017.

Pros and cons of investing

Pros

Usually beat savings returns over time
Can earn an income through dividends
If you invest through your pension you get tax relief

Cons

Your investments can go up and down, which can lead to stress
If you need your money when markets are down it won’t have time to recover
More knowledge is required than for saving
Investing can put your capital at risk. You may get back less than you originally invested.

Learn more about investing

Browse our guides on investing and whether there is a strategy that could suit your savings
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About the author

Lucinda O'Brien
Lucinda O'Brien has spent the past 10 years writing and editing content for regional and national titles. She applies her industry knowledge to ensure readers can make confident financial decisions.

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