The British ISA

[Dicky99]

There was a little more detail about the British ISA in an article in the 'i' newspaper today.

Apparenty, you will be able invest another £5000 in your ISA, if you invest in shares listed on UK stock market. The idea seems to be to boost activity on the UK stock market. The article was doubtful if this would really make much difference. It appears only 15% of ISAs actually get to £20000 anyway.

Amusingly this is how the original PEPs started in 1987. The subscription amount was higher if you bought UK-listed shares than if you wanted funds or foreign shares.

Full circle, I love it. I would do an extra 2 times £5000 a year as my wife and I always max out. The problem is more finding a UK share I want to own - will ITs be included?

Wouldn't that incentivise selling any existing UK holdings in order to buy them back to utilise the extra allowance

[GeoffF100]

Saving a full 0.5% of tax when shareprices can fluctuate such a lot in just a day. It's not much of an incentive.

Not really. And real HYPsters as we know only pay it once anyway. By far the much bigger drags on income are (1) their brokers' custody fees, mine increased +20% a few years ago and now that I am seeing more of their flashy ads on telly I fear will do again and (2) their own keyboards.

You only pay stamp duty once if you buy and hold to death. Nonetheless, it is £5,000 per £million. That is not small beer to me.

Getting rid of stamp duty should boost trading. An additional 0.5% did not matter too much when trading cost me 1.6% commission on each side and a spread of 1%, even on blue chip shares. Trading generates liquidity. LTBH generates very little liquidity. Companies IPO in New York because it is a more liquid market, and the government moans about it. Getting rid of stamp duty would be more productive.

My annual broker custody fees are zero, and my annual trading commissions are typically about 0.002% of my portfolio. I do not buy keyboards very often, but they are an even smaller cost to me.

[moorfield]

You only pay stamp duty once if you buy and hold to death.

As I wrote, real HYPsters. Not all these "trading HYPsters" you see nowadays who think they know better

[GeoffF100]

It looks a dead duck:

https://portfolio-adviser.com/platforms ... tish-isas/

The financial services industry is dead against it, and it could not be implemented before FY 2024-25. At root it is a protectionist measure rather than an attempt to improve investor outcomes. If the government wants to improve investment it should make the UK a more attractive place to invest.

[Lootman]

Amusingly this is how the original PEPs started in 1987. The subscription amount was higher if you bought UK-listed shares than if you wanted funds or foreign shares.

Full circle, I love it. I would do an extra 2 times £5000 a year as my wife and I always max out. The problem is more finding a UK share I want to own - will ITs be included?

Wouldn't that incentivise selling any existing UK holdings in order to buy them back to utilise the extra allowance

If you do not have the cash to make that extra subscription then yes, depending on your CGT situation.

It looks a dead duck:

https://portfolio-adviser.com/platforms ... tish-isas/

The financial services industry is dead against it, and it could not be implemented before FY 2024-25. At root it is a protectionist measure rather than an attempt to improve investor outcomes. If the government wants to improve investment it should make the UK a more attractive place to invest.

Then how about a temporary boost to the subscription amounts, say just for March and April 2024, to capture the tax year change?

And/or a temporary lowering of the CGT rate for the same time period?

[Grumpsimus]

It looks a dead duck:

https://portfolio-adviser.com/platforms ... tish-isas/

The financial services industry is dead against it, and it could not be implemented before FY 2024-25. At root it is a protectionist measure rather than an attempt to improve investor outcomes. If the government wants to improve investment it should make the UK a more attractive place to invest.

I

I think that you have missed the main point, which is that it is a political measure claimed to boost investment in Britain, at little cost to the government. It is not intended to improve investor outcomes. The government has very little interest in what the industry thinks about it.

It will be a 'measure' likely to be announced in the budget on 6th March.

Most sensible people think it will make very little difference.

[GeoffF100]

It looks a dead duck:

https://portfolio-adviser.com/platforms ... tish-isas/

The financial services industry is dead against it, and it could not be implemented before FY 2024-25. At root it is a protectionist measure rather than an attempt to improve investor outcomes. If the government wants to improve investment it should make the UK a more attractive place to invest.

I
I think that you have missed the main point, which is that it is a political measure claimed to boost investment in Britain, at little cost to the government. It is not intended to improve investor outcomes. The government has very little interest in what the industry thinks about it.

If investors invest in their best interests, they invest globally, for the reasons stated clearly in the link. This measure is clearly intended to encourage British investors to ignore that and invest in Britain. Most of the investment in Britain rightly comes from overseas investors investing globally.

If the government is successful in getting more British investment, that is not likely to affect market efficiency. The expected outcome is that overseas investors reduce their British investments to maintain the market prices. Britain would not gain more investment, but its domestic investors would lose out.

I am sure that the government is more than pig headed enough not to care what the industry thinks about their idea. Par for the course I am afraid. They do not listen to people who know more about it than themselves.

[Gilgongo]

Pardon my ignorance, but if you used a "British" ISA to by shares in FTSE 100 companies, wouldn't that mean you'd be investing most of your money in overseas markets anyway? Even FTSE 250 is only about 50% UK market orientated isn't it? Or is this about tax or something?

[Grumpsimus]

Pardon my ignorance, but if you used a "British" ISA to by shares in FTSE 100 companies, wouldn't that mean you'd be investing most of your money in overseas markets anyway? Even FTSE 250 is only about 50% UK market orientated isn't it? Or is this about tax or something?

Yes, you are right the LSE is a very international stock exchange. About 75% of the earnings of the FT 100 companies comes from overseas, for the FT 250 it is 57%. Figures from the LSE.

Only 10.8% of shares are owned by UK residents, who might eligible to own them via an ISA. However, of those with an ISA, only 15% subscribe for full £20 000 and of course not all will be stocks and shares ISAs. Therefore, it is likely to only make a fairly minimal increase in investment in "British" companies.

The one group it will help is wealthy HYPers who will be able to shelter another £5000 from taxation.

Overall I think this is nothing more than the worse type of political gimmick, with little real merit. "British" is being used as buzz word and is rather misleading.

[kempiejon]

Only 10.8% of shares are owned by UK residents, who might eligible to own them via an ISA. However, of those with an ISA, only 15% subscribe for full £20 000 and of course not all will be stocks and shares ISAs. Therefore, it is likely to only make a fairly minimal increase in investment in "British" companies.

The one group it will help is wealthy HYPers who will be able to shelter another £5000 from taxation.

Overall I think this is nothing more than the worse type of political gimmick, with little real merit. "British" is being used as buzz word and is rather misleading.

I have been thinking about this British ISA similarly. If it comes to pass and like a fiar few ideas never does it will appeal mostly to those who currently use their full Isa allowance and have excess income or investments to shelter more. Those 15% of ISA subscribers who fill ISAs and have more cash are likely to vote for the incumbent government suggesting it. HYPing isn't necessarily relevant here, though that group can benefit. All investing on the London exchanges would probably benefit. I wonder if it extends to ITs invested in those indexes, they're shares after all or ETFs trackers etc?

[XFool]

I doubt if I would even bother with the British ISA if it was brought in.

The current government - now relying on gimmick politics - seems hell-bent on marching ISAs back to the complexity of the early days of ISAs and PEPs. They only became popular as they became simplified.

[Lootman]

Pardon my ignorance, but if you used a "British" ISA to by shares in FTSE 100 companies, wouldn't that mean you'd be investing most of your money in overseas markets anyway? Even FTSE 250 is only about 50% UK market orientated isn't it? Or is this about tax or something?

It is not just about where those UK companies earn their profits however. Even if you only invest in British companies that earn 100% of their profits overseas, you still are subject to the risks inherent to any entity subject to UK law. And that is the risk of a future government being a lot less business-friendly than we have known for the last 45 years.

Such single-country risk includes higher corporate taxes including windfall taxes, expansion of worker and union rights, more invasive regulations and so on.

Perhaps a foreign company that happens to have a London listing but that makes all its profits overseas could work in a "British ISA"?

Increase the annual ISA subscription limit to £25,000 by all means but this is just a gimmick that complicates things.

[SebsCat]

Looks like this idea hasn't gone away and may end up even crazier than previously considered....

From https://www.yahoo.com/news/jeremy-hunt- ... 00580.html

But one version of the UK ISA plan winning support in the industry wouldn’t just incentivize savers to put British money into British stocks, it wouldn’t allow tax relief on investments abroad. That may cost households a chunk of the premium they’ve been enjoying from holding shares in more dynamic foreign markets. Rather than handing taxpayers a giveaway, it could ultimately leave them worse off, to the tune of thousands of pounds.

and even

Another wrinkle is how to define “British” equities. International FTSE 100 stocks that generate most of their business overseas may need to be excluded, according to Graham Simpson, head of Quest Research at Canaccord Genuity.

Our exposure to overseas markets is all via UK listed ITs so any removal of tax relief for directly held foreign listed shares wouldn't impact us, but it's still a dumb idea. That anyone is even suggesting that it might apply to FTSE 100 companies beggars belief (hopefully that comment is specifically designed to show how stupid the idea is).

[pochisoldi]

It would be a waste of time.
The only direct beneficiaries would be those with enough money to invest, who would shift UK investment into the "new" allowance, and then use the freed up general ISA allowance to invest outside the UK.

There would be an indirect benefit to the Conservatives, who would be able to wear their protectionist badge with pride, whilst tarring anyone who calls out the emperor's new clothes as being "unpatriotic". The irony...

[ayshfm1]

I'd be in like Flynn.

UK market is international, so I've always dismissed the home bias argument, it just isn't. It does have the issue of being boring and is income generative rather than growth. But since I'm retired income is what I want and without tax worries, what's not to like? Full 25K on April 6th if I can!

[ayshfm1]

I pondered on why I might look at doing this (if I was in power).

I don't think it has much to do with investment. The UK stock market has had poor performance, as we all know. The reasons for this are numerous but probably the most telling ones are a, better corporation tax rates elsewhere, forcing institutions to buy bonds to manage risk, etc. Companies also look to list (relist) elsewhere to get that better corporation tax and companies looking to float see the sluggish performance and choose other markets. This is all self re-enforcing

So far so obvious, there is no compelling reason to list in London and some pretty good ones to list elsewhere. Things like windfall taxes for example would be enough to remove London from any short list for many companies.

Now to the reason. Companies listed in London pay their taxes to the UK and I imagine HMRC has noticed that things are not going in the direction they need. I think this measure is a near free way of nudging up the performance of the London stock market and thus make it more attractive to list on it and then pay UK taxes. By free I mean not just in fiscal terms but also in political terms. The simplest way to get companies domiciled and listing in the UK is to undercut Ireland on corporation tax, but can you imagine the outcry? I would do it in heartbeat. There would no where in Europe where is was cheaper to headquarter your company than the UK. We'd be awash with more tax than we knew what to do with in a few years, at the expense of the Irish.

[Alaric]

Companies listed in London pay their taxes to the UK

Are the two actually connected? Is it not possible to be listed in London and have a tax domicile somewhere else? Equally have a UK tax domicile and be listed on a foreign stock exchange.

There isn't tax relief as such on ISA contributions. It's an exclusion of interest, dividends and other investment proceeds from UK tax assesments.

[XFool]

Is it not possible to be listed in London and have a tax domicile somewhere else? Equally have a UK tax domicile and be listed on a foreign stock exchange.

Yes.

[GeoffF100]

The reasons for this are numerous but probably the most telling ones are a, better corporation tax rates elsewhere, forcing institutions to buy bonds to manage risk, etc.

Forcing pension funds to act in the best interests of their pensioners by matching liabilities does not depress the UK stock market. The market decides what UK shares are worth and pays that. If we incentivise UK citizens to buy UK stocks, overseas investors will sell to maintain the market price.

I think this measure is a near free way of nudging up the performance of the London stock market and thus make it more attractive to list on it and then pay UK taxes.

No. The market is too efficient for that to work.

The simplest way to get companies domiciled and listing in the UK is to undercut Ireland on corporation tax, but can you imagine the outcry? I would do it in heartbeat. There would no where in Europe where is was cheaper to headquarter your company than the UK. We'd be awash with more tax than we knew what to do with in a few years, at the expense of the Irish.

We are a bigger country than Ireland. We need the tax. We cannot afford to lead a race to the bottom. That would be an act of self harm.

[MuddyBoots]

The simplest way to get companies domiciled and listing in the UK is to undercut Ireland on corporation tax, but can you imagine the outcry? I would do it in heartbeat. There would no where in Europe where is was cheaper to headquarter your company than the UK. We'd be awash with more tax than we knew what to do with in a few years, at the expense of the Irish.

We are a bigger country than Ireland. We need the tax. We cannot afford to lead a race to the bottom. That would be an act of self harm.

Mention of Ireland got me thinking of one of my nitpicking little issues, because sometimes Northern Ireland (NI) is treated differently from the rest of the UK. Technically NI isn't part of Great Britain because it says on our passports "United Kingdom of Great Britain and Northern Ireland".

I'm not quite sure what the official definition of "Britain" is vis-a-vis "Great Britain" - looking up definitions on Wiktionary, the formal meanings of both excludes NI but the looser conversational definition includes it, equating it with the UK.

I'd better steer clear of "British Isles" because that can include the island of Ireland!

As far as I understand it, ISAs are available to NI residents the same as the rest of us so I'm probably worrying over nothing. This whole issue is probably a storm in a teacup, and "UKish ISA" doesn't have the same ring to it as "British ISA". But if we're going to use "British" in a loose way for something official like an ISA, why do we need the passport use of Great Britain?