Tax Exempt Savings

Treasury written question – answered on 22nd February 2005.

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Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer, Liberal Democrat Spokesperson (Treasury)

To ask the Chancellor of the Exchequer

(1) if he will list increases to the premium limit of tax exempt savings plans since 1992;

(2) what estimate he has made of the cost to the Treasury of raising premiums of tax exempt savings plans to (a) £600 per annum and (b) £1,200 per annum.

Photo of Stephen Timms Stephen Timms The Financial Secretary to the Treasury

The premium limit for tax exempt savings plans was increased from the 1992 level to the current level on 1 May 1995, the day on which the Finance Act 1995 was passed.

The estimated current cost of tax-exempt savings plans, with an annual premium limit of £300 is around £70 million per year and in recent years this cost has been increasing at an annual rate of about 10 per cent.

Increasing the limit to £600 or £1,200 per annum would potentially cost the Exchequer an extra £30 million or £120 million per year respectively in the long run. Doubling the limit would not necessarily double the cost because many tax-exempt savings plan customers do not save at the current maximum.

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