One of the highlights of the Budget for investors was the introduction of the British ISA. This allows UK investors to invest £5,000 in stocks without having to pay tax on dividends or capital gains.
As someone who already owns UK shares, the initiative is an opportunity to buy stocks I would have bought anyway in a tax-advantaged way. Here’s how I’d go about doing it today.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.
Contribution limit
A £5,000 contribution increases the existing Stocks and Shares ISA contribution limit by 25%. And I think the best way to approach it is by viewing it as part of the same thing.
The thresholds for dividend tax and capital gains taxes are set to fall in April. So both passive income investors and those looking to build wealth stand to benefit from an increased allowance.
Beyond the British ISA, there were some other interesting announcements in the Budget. And I think there are some UK businesses that stand to benefit in ways that aren’t immediately obvious.
As a result, I have stocks on my radar from both the FTSE 100 and FTSE 250. If I had an extra £5,000 to invest in my Stocks and Shares ISA, I’d look to divide it between two companies.
Consumer products
At first sight, it might be difficult to see how Unilever (LSE:ULVR) stands to benefit from the 2024 Budget. But I think the big cut to National Insurance could help the company.
One of the big issues for Unilever recently is that some of its brands have been struggling to grow, with only 38% gaining market share. This has been due to customers trading down to cheaper alternatives.
While the company is making moves to try and combat this, there’s a risk it might continue. But an additional £900 for the average worker might help arrest the shift in consumer choices.
The market didn’t agree, with the stock falling on the day of the announcement. But I think that this looks like a good opportunity to buy shares in a quality company to hold for the long term.
Hospitality
Alcohol duty stayed fixed, but the hospitality sector had been hoping for a VAT reduction that ultimately didn’t come. Yet this could actually be a good thing for J D Wetherspoon (LSE:JDW).
After reducing its debt significantly over the last few years, the company is in a decent position to withstand a downturn in the industry. It’s not so clear the same is true for its rivals.
Without a tax cut, there’s a risk of lower profits in the short term. But I think difficult trading conditions in the sector could strengthen the company’s competitive position.
If that happens, then the result should be greater profitability over time. And that’s why I’d be looking to buy the stock for my British ISA if I were able to do so tomorrow.
New ISA
I’m excited by the prospect of a British ISA. The chance to invest in UK stocks without having to pay tax looks like a great opportunity to me.
There are plenty of FTSE 100 and FTSE 250 companies I’d be interested in buying shares in. So I’m looking forward to building a portfolio of different businesses over time.
The post After the 2024 Budget, here’s how I’d invest £5,000 in UK stocks appeared first on The Motley Fool UK.
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Stephen Wright has positions in J D Wetherspoon Plc and Unilever Plc. The Motley Fool UK has recommended Unilever Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
