Budget 2025: Act now to get Britain investing, AIC urges Chancellor

Richard Stone, Chief Executive of the Association of Investment Companies (AIC), said: “Creating an investment culture won’t happen overnight. It needs to be built on understanding and trust, with a real push to improve financial literacy – which for too long has fallen between government departments.

“We have set out three measures the Chancellor should adopt in her Budget, all with limited cost to the Treasury. Now is the time for bold action and we hope that the Chancellor will use her November Budget to deliver just that.”

Read on for more details of the AIC’s key Budget proposals on ISAs, stamp duty and venture capital trusts (VCTs).

ISA reform

Richard Stone, Chief Executive of the Association of Investment Companies (AIC), said: “The current pick ’n’ mix of ISA choices is bewildering to consumers. We want the government to create a single investment ISA, replacing the stocks and shares ISA and cash ISAs.

“This would be simple to operate, encourage providers who currently only offer a cash option to provide other investment choices as well, and highlight that cash is itself an investment choice.

“Cash is essential for everyone’s financial resilience. But too much ISA money goes into cash ISAs and remains there. This is an investment choice but one which is not risk free, with inflation eroding the value of that cash and interest rates often failing to keep pace. The Chancellor should create a lower limit of £10,000 on ISA contributions for providers who only offer cash as an option.

“The latest HMRC figures show that only a third of cash ISA subscribers saved more than £10,000 in the 2022/23 tax year. The other two-thirds would be unaffected by these proposals, but for those with more to save – some 2.4 million individuals – they will be able to choose between saving or investing within the same ISA.”

Phased abolition of stamp duty

Richard Stone, Chief Executive of the Association of Investment Companies (AIC), said: “We have long campaigned to get rid of stamp duty, which puts the UK stock market at a disadvantage to overseas exchanges. It encourages investors to invest in overseas shares at the expense of home-grown companies, since they avoid a 0.5% hit on their investment returns.

“The Chancellor should use the Budget to set out a plan to remove this tax. Exempting AIM shares in 2014 was a good first step. Removing stamp duty from investment company shares would be another one. Competing products such as open-ended funds are not taxed, which distorts the market. The current approach is also an example of double taxation, since investors pay stamp duty when they buy investment company shares, then the investment company pays it again when it invests in UK companies.

“Another early step towards full abolition would be for the Chancellor to abolish stamp duty on shares purchased within ISAs and pensions. This would encourage private investors and pension funds to hold more UK shares, and remove the self-defeating bias that the UK tax system currently creates in favour of overseas equities.”

Helping VCTs generate even more growth

Richard Stone, Chief Executive of the Association of Investment Companies (AIC), said:“The VCT scheme is a real UK success story, giving investors the opportunity to back ambitious British companies and helping those companies succeed.

“The government recognised the success of the scheme in one of its first acts after the general election – extending it until at least 2035. However, the scheme risks becoming less effective because the limits on the amounts VCTs can invest in companies have not been revised for over a decade. We have put forward proposals that would not cost the Chancellor a penny but would ensure VCTs can go on supporting companies to generate even more growth and jobs for the UK.”

Proposed changes to VCT investment rules

The AIC’s proposed changes to the VCT rules include increasing the annual investment limit from £5 million to £10 million for all VCT investee companies and from £10 million to £20 million for knowledge intensive companies (companies involved in ground-breaking innovations). The lifetime limits for VCT investee companies should be increased from £12 million to £20 million, and from £20 million to £30 million for knowledge intensive companies.

Currently VCTs cannot invest in businesses with assets of more than £15 million at the time of investment. The AIC proposes increasing this limit to £20 million for investee companies and £25 million for knowledge intensive companies. Finally, the ‘age limit’ on VCT investments should be abolished. Currently, an investee company must receive its first VCT investment no later than seven years after its first sale, rising to ten years for knowledge-intensive companies.

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Notes to editors

1. The Association of Investment Companies (AIC) represents a broad range of investment trusts and VCTs, collectively known as investment companies. The AIC’s vision is for closed-ended investment companies to be understood and considered by every investor. The AIC has 291 members and the industry has total assets of approximately £269 billion.
2. For more information about the AIC and investment trusts, visit the AIC’s website.
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