UK ISA reforms could soon redirect billions of pounds into the UK economy. Investment bank Peel Hunt has called for bold changes to revive British capital markets.
The firm wants the government to cut the annual cash ISA limit from £20,000 to £5,000. It also recommends requiring 50% of stocks and shares ISAs to go into UK-listed companies, as part of suggested UK ISA reforms.
Currently, the ISA system costs the UK £9.4 billion per year in tax relief. Much of that benefits foreign stocks.
Peel Hunt: “Support the UK, Not Just the US”
Charles Hall, Peel Hunt’s head of research, argued that the system rewards foreign markets.
“It’s great I get a tax break to buy US shares,” he said. “But that does nothing for the UK economy.”
Hall urged the government to ensure tax incentives support domestic growth, highlighting the need for strategic UK ISA reforms.
Ministers Consider New British ISA
The Treasury has explored a British ISA, but hasn’t launched it yet. Some underused ISAs, like the Innovative Finance ISA, may soon disappear.
Peel Hunt estimates its reforms could shift £15 billion a year into UK stocks. That’s nearly double the £8 billion that leaves British equities annually because of inefficacies in the current ISA framework.
UK Stocks Underweighted in Portfolios
Only 11.5% of UK investor portfolios currently hold UK equities. Hall blames weak inflows, not poor performance, and calls for targeted UK ISA reforms to address this imbalance.
He believes domestic investment would spark international confidence. “Capital attracts capital,” Hall said. “That momentum could drive IPOs and long-term growth.”
Rachel Reeves Responds
Chancellor Rachel Reeves welcomed the proposal, emphasizing the positive impact of UK ISA reforms.
“We want people to save and grow their wealth,” she said. “That helps build a stronger economy for everyone.”
Reeves stressed that UK ISA reforms must balance savings, investment, and growth.
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