UK tax regime should reward hard work, say Brits

85 per cent of Brits believe that the current UK tax regime needs to do more to reward those who work hard and save well, according to new research from Abbey Savings. When questioned on taxation issues, 89 per cent of respondents believed that all savings should be tax-free and 57 per cent stated that greater tax breaks in general would encourage them to save more.

Despite an increase in the tax-free ISA allowance from £3,000 to £3,600 for cash ISAs and the overall ISA allowance increasing to £7,200 in April 2008, only a third of Brits (34 per cent) think that this will have any impact on their savings levels. The vast majority believe that these increases do not go far enough - 86 per cent of Brits think that the current tax regime needs to be changed to incentivise savers more.

Abbey’s research shows that income tax (35 per cent) and tax on interest (19 per cent) have had the greatest impact on people’s ability to save in the past 12 months. But there is clearly some education needed as over half of those with savings and investments have no idea how much tax they pay on them every year.

The vast majority of Brits (89 per cent) believe that pensioners should not have to pay any tax on their pension income, and a further 87 per cent believe that there should be greater tax breaks for those on low incomes trying to save. Almost three quarters of us (74 per cent) believe that those saving for their first home should also be allowed to save tax-free.

Reza Attar-Zadeh, Director of Savings and Investments at Abbey, said: “There is a clear feeling that the current UK tax regime doesn’t go far enough in encouraging people to save. Our research shows that increasing the tax-free savings allowance further, or indeed abolishing tax on savings completely, would encourage the majority of Brits to save more for the future.”

To help encourage customers to save more, Abbey has launched an innovative new product – the new Super ISA (Issue 2) with a market leading 10 per cent AER tax-free rate. The Super ISA is a cash ISA and is available if customers put an equal amount or more into any Abbey investment product.

The Super ISA also allows transfers-in so that savers can take advantage of getting the best rate for all their ISAs. This coupled with instant access provides savers with a highly attractive tax-efficient solution. Deposits in the Guaranteed Growth Plan are invested for the longer term offering a minimum return of either six per cent (on 3.5 years) or 18 per cent (six years), plus capital is guaranteed regardless of whatever happens to the stockmarket.

The Guaranteed Growth plan also offers the potential for capital growth through offering savers the greater of either the minimum guaranteed return or 50 per cent of any growth of the FTSE 100 index. This approach is particularly suitable for those who wish to invest in the stock market, but are concerned about potential downside or market volatility.

Abbey has a strong track record in structured products, winning the Moneyfacts Best Structured Product Provider Award 2007.