Budget 2015: First-time buyers to benefit from new Government backed ISA

THE Chancellor introduced a raft of measures intended to boost the savings and pensions market including a ‘Help to Buy’ ISA aimed at first time property buyers.

Building on the ‘pension freedom’ proposals announced last year which mean that – from April 6 – pensioners will no longer need to buy an annuity he said five million existing pensioners will be given access to their annuity.

The Government will consult on letting people who have bought annuities with their pension pots sell them, in return for a lump sum.

But it will be the changes to encourage saving that will grab the headlines.

A new personal savings allowance of £1,000 will be introduced in April next year, removing the first £1,000 of savings income from income tax.

The Chancellor said this would create tax-free banking for almost the entire population (95% of savers).

In a move aimed at making ISAs more flexible, the Chancellor announced that from later this year, people will be able to move money in and out of ISAs without losing any of their tax free entitlement.

“People have already paid tax once on their money when they earn it. They shouldn’t have to pay tax a second time when they save it.,” Osborne said.

This move will apply to cash ISAs rather than stocks and shares ISAs.

Meanwhile, a new “Help to Buy” ISA will be launched to help first time buyers  save for a deposit for a home

Within this, the Government will add a further 25% to whatever is contributed by a saver.

It’s effectively a tax cut for first-time buyers,” said the Chancellor.
Challenger bank Aldermore welcomed the move.

Charles Haresnape, managing director of mortgages & Commercial Lending at Aldermore said: “This is a welcome initiative that will boost homeownership and help first time buyers get further support to get onto the housing ladder.
 
“It is a no brainer to open one of these ISAs, given that first time buyers will receive a 25% Government bonus to their deposit. The bonus will be available on properties worth up to £450,000 in London and up to £250,000 outside of London and this ensures the bonus will be going to those who really need help to get on the property ladder.”
 

Elsewhere, Osborne announced a further restriction to pension tax relief.
From 2016-17, the lifetime allowance – for pension savings that can be accumulated free of tax – will be cut from £1.25m to £1m.

But from 2018, that allowance will be indexed and will therefore start to rise again.

And in a move that was widely trailed pre-Budget, the Chancellor announced that end-of-year paper tax returns will be scrapped in favour of “real-time” online accounts by 2020.

Individuals and small businesses will submit accounts throughout the year via computer, tablet or smartphone.

Osborne called it “a revolutionary simplification of tax collection”.

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