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Fidelity wants return of Isa tax credit

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 the recession.

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

Fidelity says: “Figures from HMRC show that in 2004/05, the first year of the new leg-islation, £7.5bn was invested in Isas, less than half the £16.1bn that was invested in the 1999/00 tax year.

“The numbers of subscribers to Isas fell over the same per-iod by 1.9 million from 4.57 million to 2.67 million. Subscriptions had not recovered by 2007/08 when 3.23 million people subscribed a total of £10.4bn into Isas.”

Fidelity estimates that the reintroduction of the divi- dend tax credit could increase the returns of existing savers by up to 13 per cent over 10 years and would also encourage new saving.

It says: “This would contribute to reversing the recent collapse in Britain’s savings rate and would be in line with the Government’s stated policy of encouraging people to take greater personal responsibility for their finan- cial security.”

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