Traditional Conservative voters got a break from all the recent economic gloom with changes to savings and help for first time home buyers. In addition to giving greater flexibility to pensions, there were also tax cuts for savers and help with deposits for first time home buyers.
Savers will be allowed to earn up to £1000 a year in interest without paying tax on it. This means a cut of £200 a year for those who earn more than £1000 a year, but 95 percent of the British population are below this.
As a result almost everyone will be taken out of this tax, also the banks will no longer automatically charge it and expect eligible savers to claim it back. This will mean three million OAPs and low earners who were already entitled to a tax cut, but did not claim it, will not miss out.
There were also changes to ISAs with savers being allowed to take money out in emergencies without it counting against their annual limit. Under the current system, anyone putting in the full £15,000 and then takes it out would have to wait for the next tax year to put it back in again.
The government also launched a new ‘Help To Buy ISA’ which George Osborne claimed took two of the government’s “most successful policies and combine(d) them”. The ISA is designed as a way of the government subsidising the deposit on homes for first time buyers.
It works by allowing first time buyers to put in up £200 a month, which is topped up by £50 from the government. The limit is £12,000 meaning the government would contribute £3000, giving an overall figure of £15,000 or ten percent of the average price paid for a home by a first time buyer. Couples can both use separate Help To Buy ISAs, and therefore double the benefit.
Mark Littlewood, from the Institute for Economic Affairs, said: “It’s great news the Chancellor is liberalising the sale of annuities and improving the flexibility of ISA products. Less positive is the economically illiterate introduction of a ‘Help to Buy ISA’ which will serve to increase demand in a housing market characterised by scarce supply.
“What we really need to help everyone struggling with the high price of housing is planning liberalisation to allow more building and reduce housing costs for ordinary people.”
There was some bad news. Osborne plans to cut the lifetime allowance on pensions will drop from £1.25m to £1m. This will not be applied to those who already have over £1m, and the figure will now be linked to inflation, so will rise every year.
Other changes included a cut of 1p a pint on both beer and cider, a freeze in fuel duty and a rise in the personal allowance to £10,800. The hated self-assessment tax return will also be abolished.