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Trade bodies urge rethink on Isa tax credit

Six trade associations are clubbing together to urge Chancellor

Gordon Brown to scrap plans to abolish the 10 per cent tax credit on

equity Isas in April 2004.

The Investment Management Association, the Pep and Isa Managers

Association and four other bodies, including Aifa and the AITC, have

written to the Chancellor seeking an urgent meeting to discuss the

effect that dropping the credit would have on savings.

The six, which include Apcims, the European Association of Securities

Dealers and Proshare, believe that removing the tax cre-dit would

discourage lower-income groups from saving in a stocks and shares Isa.

They say the move means equity Isas will only benefit higher-rate

taxpayers who will pay the same 10 per cent level as basic taxpayers.

Outside an Isa, higher payers pay 22.5 per cent on income dividends.

IMA chief executive Richard Saunders says: “At a time when the

Government is trying to encourage the savings habit at all levels, it

seems perverse to remove a tax benefit for those on lower incomes.”

Pima director general Tony Vine-Lott says: “Our research shows that

if the tax-free benefit is reduced or abolished, only a third of

customers would continue to invest in these products.”

A Treasury spokesman says: “The credit was always just a transitional

measure. Investors will still pay no tax on investment returns.”

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