Changes to ISAs sparks £5000 allowance warning after Labour abandons 'silly' scheme

As the new Labour government gets to grips with the heavy task of running the country and re-assessing the UK's finances after 14 years of Tory rule, policies announced under the previous occupants of Number 10 are starting to be scrapped. The latest such policy is an ISA that was introduced by Rishi Sunak, which some experts have called "silly."

In a fresh blow to the former Prime Minister's legacy, the British Stocks and Shares ISA is to be axed, after being floated by the Conservatives earlier this year, amid their ultimately terminal slide in public opinion. With Sir Keir Starmer pledging to close his predecessor's £22 billion financial "blackhole", the stock market ISA is no more.

Under the Tory government, there were discussions to increase the current annual ISA allowance from £20,000 to £25,000, with an additional allowance of £5,000 reserved exclusively for shares in UK-based companies. This was aimed at boosting the long-languid London Stock Exchange (LSE), which has seen a number of high-profile companies exit to seek more investment abroad in recent years.

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Scrapping the British Stocks and Shares ISA will leave a broader question about Chancellor Rachel Reeves' plan to revive the languishing LSE; and could be a disappointment to anyone who was looking forward to using their savings to invest in the British economy.

The initiative was initially put forward by the previous Conservative administration during the March 2024 Spring Budget, pitching it as a means to offer savers an increased £5,000 bump in their ISA allowance for investments in British stocks which could potentially elevate the tax-free threshold to £25,000