UK Conservatives Propose Reinstatement Of Savings Tax Incentives

by Robert Lee, Tax-News.com, London

21 April 2004

A senior Opposition Treasury spokesman is attempting to insert a new clause into the 2004 finance bill that will reinstate the tax advantages of Individual Savings Accounts which are currently being phased out by the government.

The proposal by shadow chief secretary to the Treasury, Howard Flight, calls for the restoration of the 10% dividend tax credit abolished by Chancellor Gordon Brown on April 5 this year.

His attempt to insert the new clause will also call for an extension to the tax-free savings allowances for equity Isas beyond 2006, when they are due to be significantly reduced.

"The devious Gordon Brown is screwing up Isas for the majority of the British public. Even the Labour dominated Treasury Select Committee recently criticised the planned reduction in the cash Isa limit," remarked Mr Flight, according to the Daily Telegraph.

Under the plans set out by the Labour government, the amount that can be invested tax free in a 'cash only' Isa will fall from £3,000 to £1,000 by April 2006. Similarly, the ‘maxi’ Isa limit, which includes a stocks and shares element, will fall from the present £7,000 to £5,000 by the same date.

The loss of tax incentives, combined with poor stock market performance, was blamed for a plunge in Isa sales in 2003, when they reached record lows.

However, figures from the Investment Management Association revealed that by February 2004, Isa sales were 44% higher than the previous year, although it was noted by the IMA that total sales were well off the highs seen in 2000.

Recommended