Isa allowance may be hiked above £20,000… if you invest in UK company shares
The Isa allowance can be increased above £20,000… if you invest in shares of UK companies
The Chancellor could increase the tax-free Isa allowance to make it easier for ordinary people to invest in British businesses.
Under current rules, adults can save £20,000 a year in Isas – as individual savings accounts are commonly called – without incurring tax.
There are different types of accounts – such as cash-only or for shares – but experts believe the system is too complicated.
Jeremy Hunt is reportedly considering offering an additional tax-free Isa allowance solely for money invested in companies listed on the London Stock Exchange (LSE).
Jeremy Hunt is reportedly considering offering an additional tax-free Isa allowance solely for money invested in companies listed on the London Stock Exchange
It comes after Treasury officials spent weeks meeting with experts in the city to discuss ways to extract additional funding from millions of accounts, the Financial Times reports.
Another idea being looked at is to create an Isa that allows holders to hold both cash and shares in the same account.
A shake-up could be announced as soon as the autumn statement is released in November.
The news would be a boon for the City of London after a slew of major companies rejected or announced plans to leave the LSE for the New York Stock Exchange this year.
This has put its reputation in crisis and there are fears that more companies will leave.
The government is desperate for British companies to get more ordinary people – known as private investors – into the stock market. Private ownership of shares in Britain has fallen since the 1960s, when individuals owned more than half the shares by value.
But this has fallen despite the ‘Tell Sid’ era of privatizations in the 1980s, when groups like British Gas were taken public, and now stands at only around 12 percent.
Mr Hunt has already unveiled a series of policies, called the Mansion House Reforms, which aim to make it easier for pension funds to invest in equities, also known as shares.
Attracting more financing makes it much more likely that a company will grow.
> The essential guide to Isas: what you need to know about tax-free saving and investing – and how to get started
Where UK Isa money goes
According to the latest official figures, there were around 12 million Isas open in the 2020-2021 financial year, but Britons are expected to put more money into savings accounts now that interest rates are much higher.
The Bank of England has increased its base rate – which stands at 5.25 percent – fourteen times in the past two years.
According to Moneyfacts, the average long-term Isa interest rate is now just over 5 percent.
Most people are already choosing cash Isas, with stocks and shares Isas the next most popular account.
As well as cash and shares Isas, there are two other types, the Innovative Financial Isa and the Lifetime Isa. Innovative financial accounts allow users to give money through peer-to-peer lending.
This is done through platforms that connect them online with individuals, companies and property developers – but it is considered very risky and has been little used.
Lifetime Isas must be set up by savers aged between 18 and 40. They can be used to buy a first home or during retirement – for both purposes the government will top up the amount of money by 25 percent.
The complexity of the system makes it a priority to simplify the system as quickly as possible, activists argue.
A Treasury spokesman said: ‘HM Treasury is open to ideas about how we can make Isas more attractive to encourage people to develop a savings habit and invest in a way that works for them.’
Compare the best DIY investment platforms and shares Isas
Investing online is simple, cheap and can be done from your computer, tablet or phone at a time and place that suits you best.
When it comes to choosing a DIY investment platform, shares Isa or a general investment account, the range of options may seem overwhelming.
Each provider has a slightly different offering, charging more or less fees to trade or hold shares and giving access to a different range of shares, funds and investment trusts.
When weighing up the right choice for you, it’s important to look at the service it offers, along with the administration and transaction fees, plus any other additional costs.
To help you compare the best investment accounts, we’ve put together the facts and put together a comprehensive guide to choosing the best and cheapest investment account for you.
We highlight the key players in the table below, but recommend that you do your own research and consider the points in our full guide linked here.
>> This is Money’s full guide to the best investment platforms and Isas
The platforms below have been independently selected by This is Money’s specialist journalists. If you open an account through links marked with an asterisk, This is Money will earn an affiliate commission. We do not allow this to affect our editorial independence.
| Administration costs | Cost notes | Trading in funds | Standard stocks, trust, ETF trading | Invest regularly | Dividend reinvestment | ||
|---|---|---|---|---|---|---|---|
| AJ Bel* | 0.25% | Maximum £3.50 per month for shares, trusts and ETFs. | £1.50 | £9.95 | £1.50 | €1.50 per offer | More detail |
| Bestinvest* | 0.40% (0.2% for ready-made portfolios) | Account fees reduced to 0.2% for ready-made investments | Free | £4.95 | Free for funds | Free for income funds | More detail |
| Charles Stanley Direct | 0.35% | No platform fees for shares on a transaction that month and an annual maximum of £240 | Free | £11.50 | n/a | n/a | More detail |
| Fidelity* | 0.35% on funds | £7.50 per month up to £25,000 or 0.35% with a regular savings plan. Maximum £45 per year for shares, trusts and ETFs | Free | £7.50 | Free funds £1.50 shares, trusts ETFs | £1.50 | More detail |
| Hargreaves Lansdown* | 0.45% | Maximum £45 for shares, trusts and ETFs | Free | £11.95 | £1.50 | 1% (€1 min, €10 maximum) | More detail |
| Interactive Investor* | £4.99 per month under £50,000, £11.99 above, £10 extra for Sipp | £3.99 per month back in free trade credit (does not apply to £4.99 subscription) | £3.99 | £3.99 | Free | £0.99 | More detail |
| iWeb | £100 one-off (no charges until end of 2023) | £5 | £5 | n/a | 2%, maximum €5 | More detail | |
| Accounts with some limits but attractive offers | |||||||
| Etoro* No Isa or Sipp | Free | Investment account offers stocks and ETFs. Beware of high-risk CFDs on trading accounts | Not available | Free | n/a | n/a | More detail |
| Free trade* No investment funds | Free for Basic account, £4.99 per month for Standard with Isa £9.99 for Plus | Freetrade Plus with more investment and Sipp costs £9.99/month inc is a fee | No money | Free | n/a | n/a | More detail |
| Forefront Only Vanguard’s own products | 0.15% | Vanguard funds only | Free | Only free Vanguard ETFs | Free | n/a | More detail |
| (Source: ThisisMoney.co.uk September 2023. Manager percentage can be charged monthly or quarterly | |||||||