Nicholas Lyons, chair of Standard Life, suggested restricting the tax-free stocks and shares Isa wrapper to UK assets to revive domestic capital markets. He also called for an inheritance tax exemption on government bonds to increase retail investor demand.
The proposals aim to address the long-term underperformance of UK capital markets and encourage domestic investment, potentially impacting the investment choices of millions of UK savers and influencing government fiscal policy.
Nicholas Lyons, the chair of Standard Life and former Lord Mayor of London, has proposed significant reforms to the UK's tax-efficient savings accounts. He suggested that the stocks and shares Isa wrapper should be restricted to investments in UK assets, arguing that this would help revitalize the nation's struggling capital markets and stimulate economic growth. Lyons questioned the current practice of using tax incentives to lower the cost of capital for foreign companies, advocating instead for a return to the original structure of the Personal Equity Plan, which mandated investment in domestic assets.
Currently, British savers can invest up to £20,000 annually tax-free within a stocks and shares Isa. However, the existing framework allows investors to choose any company or fund globally, leading many to favor foreign equities over UK-listed ones, especially given punitive taxes like stamp duty on shares. Lyons' proposal goes beyond the previously suggested British Isa, a £5,000 wrapper for UK equities that was introduced by former Chancellor Jeremy Hunt and later scrapped by Rachel Reeves.
In addition to Isa reforms, Lyons urged ministers to introduce an inheritance tax exemption for retail investors who purchase UK government bonds, known as gilts. He noted that British retail investors hold a disproportionately small share of their country's sovereign debt. Such an incentive, he believes, would create greater natural national demand for debt, send a strong message to international investors about pricing power, and potentially fund the UK's rearmament drive. A spokesperson for HM Treasury stated that the government is committed to enhancing the retail investment culture and supporting investment in British businesses through existing measures and wider reforms.