In the Netherlands, we have had something like that for a long time now. After elementary school (at 12 years), children receive a recommendation for one of the various levels of high school: from lower vocational education (VMBO, 4 years) to pre-university (VWO, 6 years). It is possible to go from one level to the next, by graduating and then enrolling in the last-but-one year of the next level. That means you lose a year going up each level, which gives you an idea of the difference between the levels. Some schools that teach at multiple levels will allow you to switch during your education, sometimes with some remedial summer school being necessary.
From what I understand, the schools in the UK teach each subject at various levels, and you can sort of decide for yourself to what level you want to take each subject. That could be even better if the class roster is flexible enough: good students could race ahead to the more advanced levels for some subjects, while taking the stuff they have more difficulty with at the regular pace. In a flexible system like that you do need to have strong and continuous guidance: some kids need a lot more structure and hand-holding, and for that age group you need to have some rules in place to ensure that each kid picks the classes and levels that they can cope with, and realises their maximum potential (instead of just coasting on an easy selection of subjects that isn't worth squat).
Another advantage of such a system is that a student does not need fear they'll flunk and are held back an entire year; if they get inadequate scores on a few subjects, they can just repeat those the next year and continue to level up in their other subjects.