The chancellor revealed the tax break in his Autumn Statement last week as part of a series of measures aimed at bolstering investment in businesses in the UK.
From April 2014, investors will no longer pay the stamp duty reserve tax charge on purchases of shares in ETFs, as long as they are domiciled in the UK.
Tim May, chief executive of the Wealth Management Association, said the move would provide a “strong incentive” for investing in the sector and complement the Treasury’s previous decision to remove stamp duty on alternative investment market shares.
He said: “Encouraging retail investment in this way promotes saving over spending and supports economic growth through increasing investment in British businesses.”
Monica Gogna, partner in the financial regulation division at City law firm Pinsent Masons, commented: “This is surely another sign that the ETF industry in Europe is set to grow and compete with
the much larger ETF sector in the USA. “
Mark Johnson, head of UK sales at iShares, said the decision would ultimately “increase consumer choice” and allow various types of investors,
from retail to institutional, to use ETFs.
In October, Nucleus reported that ETF inflows had racheted up on its platform, rising from £313,387 in September 2012 to £598,899 a year later.
Alistair Cunningham, director of Surrey-based Wingate Financial Planning (@Cunningham_UK) said: “ETFs are not quite tax-exempt. That would be nice as they are still subject to capital gains tax and income tax.”