Savers hit with STEALTH TAX: 11MILLION Britons targeted with levy meant for big business
PHILIP Hammond has unleashed a new stealth tax that will clobber 11.6million ordinary British savers, wiping huge amounts of money from their long-term investment policies with a string of big name insurance firms, it has been revealed.
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Experts say people will lose more than £840million under the previously little-noticed new charge, which has just come into effect.
The Chancellor unveiled his technical change to the Treasury’s corporation tax policy in last year’s Budget, claiming it would only apply to companies.
But it has now been revealed that people holding endowments, whole-of-life or and with-profit plans at companies like Aviva, Prudential and Standard Life will be hit.
Under the changes, money earned on those policies will now be taxed at 19 percent.
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The plans, which can last more than 20 years, had previously been exempt from corporation tax unless annual profits exceeded the inflation rate.
After it was announced, the Treasury claimed the measure “has no impact on individuals or households as it only affects companies”.
But it has now admitted individual policy holders will be affected, describing the financial hit as “small”.
However, the Association of British Insurers has calculated the impact on firms will run to £841million over the next five years.
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That will then be passed on to customers, leaving savers up to £150 worse off annually.
Royal London, which estimated up to three million of its customers could be hit, has branded it “a stealth tax on millions of people who have made sacrifices and saved hard.”
The firm’s director, Steve Webb, called for Mr Hammond to think again saying: “The only decent thing would be for the Treasury to exempt individuals from this new tax.”
And pensions expert, Baroness Altmann, said: “Savers have had a tough time in recent years and losing a further £150 a year will be significant for many elderly savers.
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“I understand the Government needs to raise extra revenue and its intention is to increase tax paid by companies.
“However, ordinary investors will also be paying more and this feels like a stealth tax because it was not explained properly at the time.”
A Treasury spokesman said: “We are changing the system to correct an imbalance.
“We expect any impact on policyholders to be small.”
