Reeves ‘looks at minimum UK shareholding' in ISA reform

Chancellor Rachel Reeves is reportedly considering a minimum UK shareholding requirement for stocks and shares ISAs.

The chancellor is eyeing up reforms to the stocks and shares ISA, the Financial Times reported on 17 October, as she tries to incentivise more Brits to invest in the UK stock market and build a culture of retail investing in the country.

It could mean Brits are effectively forced to have a portion of their investment portfolio in UK-listed equities, eliminating the full geographical freedom that the current stocks and shares ISA permits.

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The assumed goal would be to get British savers to inject more cash into the UK stock market, which has struggled to keep up with the United States.

A boost to the stock market would, in theory, lead to a pick up to UK economic growth.

The minimum UK shareholding requirement is one of a number of proposals being considered by the chancellor, the FT reports, with another being a suggestion to remove stamp duty from London-listed stocks held within ISAs.

Reeves is also reportedly looking at halving the cash ISA limit to just £10,000.

The case for a UK shareholding requirement

The theoretical merits of imposing a minimum UK shareholding requirement to the stocks and shares ISA is that savers would be incentivised to buy UK-based equities, and therefore keep the economic benefits of shareholding in the country.

When rumours of a cash ISA cut first circulated in early 2025, critics argued that such a measure would do little to boost economic growth in the UK because savers would be more likely to place their money into foreign, primarily US-based, equities which have historically provided much stronger returns.

If there were a mandate to put a proportion of your stocks and shares ISA into UK shares, they would be prevented from doing this.

Questions remain whether investors would actively decide to invest in equities that are anticipated to bring about worse returns when they could invest outside of the ISA system, albeit while missing out on the tax benefits.

The case against the proposal

Adding a minimum UK shareholding requirement is reminiscent of the failed ‘Brit ISA’ proposed by the previous Conservative government, says Tom Selby, director of public policy at AJ Bell.

Selby says that to revive the “fundamentally flawed UK ISA proposal” would be the wrong step for the chancellor to take.

He said: “Any move towards mandating UK asset allocations within ISAs would be a pretty naked political gimmick, adding huge complexity to the system with no obvious benefit to investors or the economy.

"Given 40-50% of ISA assets are already invested in UK companies or UK-focused funds, the government should be focusing policy interventions on making it easier for people to transition from short-term cash saving to long-term investing and letting investors’ natural ‘home bias’ deliver capital benefits to UK plc.”

Instead, he urged Reeves to press forward with removing stamp duty on UK shares within the ISA instead.

Selby added: “Stamp duty is a tax that explicitly disincentivises investment in British companies at a time when government policy is aimed at doing precisely the opposite.

"While the multi-billion-pound annual cost of scrapping stamp duty across the board might make the chancellor wince, creating a specific carve-out for ISAs to support her retail investing drive could be achieved at a fraction of this cost – we estimate somewhere in the region of £120 million. In government spending terms, that is pretty much a rounding error and would remove a nonsensical barrier to ISA investors buying shares in UK businesses.”

Emma Wall, chief investment strategist at Hargreaves Lansdown, echoed enthusiasm for the suggestion to waive stamp duty on UK shares in ISAs.

She added: “We think that there are better ways to promote retail investment than a UK mandate however, as we find among our clients the majority of trades are into UK shares already, and that better client outcomes are delivered through an unfettered approach to regional asset allocation.”

ISA regime does not need more rules, it needs simplification, says AJ Bell

AJ Bell has urged the chancellor to focus on simplifying the ISA system overall, arguing it is too complicated and can easily confuse consumers if they decide to transition from cash savings to investing in the stock market. The investment platform says this confusion is a contributing factor in why Brits hoard money in cash.

There are around three million people in the UK with £20,000 or more invested in cash ISAs and no money invested in stocks and shares ISAs, using a conservative estimate, research by AJ Bell suggests.

If just half of that money was invested, an additional £30 billion of investment would be unlocked, potentially boosting the UK stock market and possibly bringing better long-term returns than if that money was saved in cash.

Selby says the chancellor should not punish cash savers but instead make it easier for them to invest.

He suggested Reeves “address the negative impact the siloed ISA structure has”, by combining cash ISAs and stocks and shares ISAs into a single main ISA product.

“As well as simplifying the overarching ISA framework, this reform would make it easier for people to transition from holding cash to investing for the long term, supporting wider efforts to boost retail investing, improve financial resilience and drive economic growth," he added.