Weekly Market Update – Week Ending 08/03/24
In the same vein that the Mansion House Compact is looking to encourage investments into UK unlisted companies with pensions, Jeremy Hunt is looking to introduce the ‘Great British ISA’ as a £5,000 extension to the current £20,000 annual ISA allowance.
Outside of the debate around the dictation of asset allocation, which should vary between investors when considering their views on risk, my consideration is around the complexities under which this could be introduced to provide value and other opportunities. In my view, this will likely be dictated by the restrictions on what UK investments are available within the Great British ISA, which is to be decided once the Treasury’s consultation has defined what a UK Investment actually is.
If this is in-line with the Mansion House Compact, the additional allowance may require investment into unlisted UK companies. If enforced, the nature of accessing these types of investments will likely lead to exposure being taken via actively managed investment funds, potentially bringing issues around daily liquidity and higher costs.
If this is the case, and investors are looking to invest into smaller UK companies, are Venture Capital Trusts (VCTs) not better placed? VCTs are pooled investments and also achieve tax free returns in the same way the Great British ISA would, and also come with a 30% income tax relief claimable on the amount invested with an annual allowance of £200,000.
As ever, the phrase ‘don’t let the tax tail wag the investment dog’ springs to mind, but it may be that there are existing investment vehicles better served for some if there is a restriction placed on the type of UK companies that can be invested into within the Great British ISA.
Dominic Thackray DipPFS
Financial Adviser
General risk warnings & other important information
Venture Capital Trusts (VCTs) are high risk investments and you are unlikely to be protected if something goes wrong.
Tax assumptions and reliefs depend upon an investor’s particular circumstances and may change if those circumstances or the law change.