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Fidelity calls on Chancellor to reinstate dividend tax credit for equity Isas

Fidelity has written a letter to the Chancellor calling for an immediate reinstatement of dividend tax credit for equity Isas.

The move comes after both the Chancellor and the Prime Minister indicated that this year’s Budget will focus on the plight of savers who have borne the brunt of moves to reduce the cost of borrowing in response to the credit crunch and subsequent recession.

Since losing the ability to reclaim a tax credit in April 2004 figures from Fidelity show that ISA sales were negative in 16 out of 19 quarters between the announcement and the end of 2008.

A statement from the group reads: “Figures from HMRC show that in 2004/05, the first year of the new legislation, £7.5bn was invested in ISAs, less than half the £16.1bn invested in the 1999/00 tax year. The numbers of subscribers to ISAs fell over the same period by 1.9m from 4.57m to 2.67m. Subscriptions had not recovered by 2007/08 when 3.23m people subscribed a total of £10.4bn into ISAs.

“Fidelity estimates that the re-introduction of the dividend tax credit could increase the returns of existing savers by up to 13% over 10 years and would furthermore encourage new saving as well. This would contribute to reversing the recent collapse in Britain’s savings rate and be in line with the Government’s stated policy of encouraging people to take greater personal responsibility for their financial security.”

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