The government has decided to scrap plans for a British ISA over concerns it would have complicated the investment market for individual savers.

Plans under the previous Conservative government, announced in the March Budget by the former Chancellor, Jeremy Hunt, would have seen funds invested through the British ISA allocated specifically to London-listed stocks.

However, the Labour government has now abandoned the plans, which would have allowed savers to invest an extra £5,000 into UK-listed equities on top of the existing £20,000 ISA allowance.

A government figure told the Financial Times that they did not want to “complicate the ISA landscape even further”.

Hargreaves Lansdown CEO, Dan Olley, said he was “pleased” that the government would not be pursuing with the British ISA.

“Simplicity is key when it comes to getting people to start investing,” he said. “That’s why the ISA allowance is so essential, it helps people start investing without any of the complexity around tax.

“The UK ISA would have added complexity with little real benefit for many. Our data clearly shows that British retail investors are already enthusiastic backers of British companies.

"Of those equities held on HL’s platform, 80 per cent of the trades in the last year were on the London markets.

“The key to investing is to start early to benefit from the power of compounding over time, but many people lack confidence or time to do so. This is a challenge to be addressed.”

AJ Bell CEO, Michael Summersgill, also welcomed the move and called the British ISA a “political gimmick that was doomed to fail”.

“The new government deserves huge credit for consigning this ill-conceived idea to the policy dustbin and will hopefully now take a more sensible, long-term approach to ISA reform than their predecessors, focused on simplification for the benefit of consumers,” Summersgill added.

“Merging Cash and Stocks and Shares ISAs is the obvious starting point, a reform that would make life easier for investors and would-be investors and could provide a significant boost to UK capital markets into the bargain.

"Over the longer-term, the government should consider whether the best features of the current ISA regime can be combined into a single ISA product.”

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