on a "step'' basis since 1997. Gordon Brown delivered his introductory Budget on July 2, 1997 and his "statement of intent'' on November 25, 1997. The first "full length'' Budget was delivered on March 17, 1998, which formed the basis for the 1998 Finance Act which was agreed to on July 31, 1998. Further changes are expected in the next Budget which will be delivered in March, 1999. There are a number of existing tax efficient investments which can still be made prior to April 5, 1999.

Tax Exempt Special Savings Accounts This scheme was first introduced in 1991 and are special accounts held in banks to which 9,000 can be invested over five years. Interest earned on such accounts is free of tax, as long as no funds are withdrawn during the five years. The Special Savings Accounts started by April 5, 1999 will be able to run for the full five years. After April 5, 1999, no new TESSA can be started.

Personal Equity Plan This scheme was first introduced in 1987. Funds within a PEP are generally invested in shares, securities, authorised investment trusts and also UK corporate bonds, convertible bonds and preferred shares. An investment of 6,000 can be made into a general PEP and 3,000 in a single company PEP, each year. Thus, a married couple can invest 18,000 each year in a PEP.

The tax advantages of investing in a PEP are: Interest and dividends received within the plan are free of tax, and capital gains on the disposal of stock within the plan are free of tax.

PEP's started by April 5, 1999 will be able to run for the full five years.

After April 5, 1999, no new PEP can be started.

Individual Savings Account The purpose of the ISA is to replace the tax advantages of the soon to be defunct TESSA's and PEP's. ISA accounts can be started on or after April 6, 1999, and will run for ten years. ISA accounts can only be opened by individuals who are both resident and ordinarily resident in the UK.

Investment income and capital gains derived within the plan will be free of tax. In addition, a ten percent tax credit will be paid for the first five years of the scheme (expiring on April 5, 2004) on dividends from UK equities.

Withdrawals can be made at any time without loss of tax relief. The maximum contribution to an ISA is 5,000 of which 1,000 can be invested in cash and 1,000 invested in life insurance. In the year 1999/00, the maximum annual contribution will increase to 7,000 of which 3,000 can be invested in cash and 1,000 in life insurance. In addition to a cash contribution, shares received from an approved profit sharing or share option plan can be rolled over (free of tax) to an ISA at current market value.

As currently constructed, it is possible for an individual to invest a maximum of 40,000 into TESSA's, PEP's, and ISA's over the next five years or 80,000 for a married couple. Interest, dividends and capital gains can be derived free of tax in addition to the ten percent tax credit on UK dividends in the ISA.

National Savings On a more mundane note, the first 70 of interest received annually from the National Savings Bank are free of tax. The national Savings Department also issues tax free bonds (if held for five years). Current interest rates are 4.8 percent, compounded annually (the equivalent of eight poercent for a taxpayer in the 40 percent tax bracket.

Commentary While this entire column discusses tax efficient investments, we would urge caution. We do not recommend making an investment for tax purposes only. You should insure yourself that you are first comfortable with the underlying investment. If you are, look at the tax free status of the investment as a plus.

*** The tax advice given by this column is, by necessity, general in nature. You should, of course, check with your own tax consultant as to how specific transactions affect you since tax advice varies with individual circumstances.

James Paul Sabo, CPA, is the President of Expatriate Tax Services, PO Box 617, Bernardsville, New Jersey 07924 and is associated with GulfStream Financial Ltd. in Bermuda.

Chancellor of the Exchequer Gordon Brown.

BUSINESS BUC Chancellor of the Exchequer Gordon Brown.