UK's Tories Pledge To Abolish Tax On Savings And Dividends For 90% of Britons

by Amanda Banks, Tax-news.com, London

07 February 2001

The Tory Party announced on Monday this week a pledge to abolish the tax on savings and dividends for those in the low and middle-income tax brackets.

With a general election on the horizon, William Hague is heading an all-out campaign to woo tax payers in a bid to counteract Labour's accusations that the Tories are only interested in helping the wealthy by saying that his proposals would not apply to those savers whose income exceeded £32,785 per year - when the 40 per cent top tax rate starts to kick in on their savings.

Under the plans, investment income that takes the investor up to the threshold would be tax free, but investment income above that would be liable to a 40 per cent tax. Individuals would still pay 40 per cent tax if their investment returns are on top of other earnings over £32,785.

If the Tories come to power they will implement their tax cutting plans before the 2003/4 financial year at a cost of £3bn, which is to come out of the £8bn they have said they can find by squeezing Government spending.

While the Tories attempt to woo savers and married couples with small children, Labour is focusing on lower-paid families as Chancellor Gordon Brown pledged that at least 5 million families across the UK will be better off under the new £1.9 billion Children's Tax Credit scheme due to take effect in April.

When questioned on the possibility of sweeping tax cuts in the forthcoming budget, Mr Brown said this was unlikely as they could pose a threat to the country's economic stability: 'We are not going to prejudice the stability we have achieved for the economy,' he said. 'We cannot go along with a proposal that would try to get billions of pounds out of our public services. We will not have indiscriminate, across-the-board tax cuts that would put our stability, and these services, at risk.'

Labour argued that people on lower incomes would not significantly benefit under the Tory scheme, saying that the lowest 10 per cent of earners would receive a mere £18 a year extra, middle-income earners would gain £72 a year and the top 10 per cent of earners would gain £1,500 a year. Alistair Darling, Secretary of State for Social Security, said: 'This is the same old Conservative Party. Its sums don't add up. It is the party of the few, not the many.'

Hague said he promises to build a 'responsible society' by encouraging people to save their money, arguing: 'the overwhelming majority of people who have already paid tax on the income they earn should not have to pay tax again when they save that income and earn interest on it ... As a country we now put aside no more of our wealth than our parents did nearly 40 years ago.'

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