In today’s Budget statement, chancellor George Osborne confirmed that the government was not planning to make any compulsory changes to the existing tax system after it became “clear there [was] no consensus” during the consultation process.
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The government has today unveiled a new Lifetime ISA to help savers aged under 40, and has raised the ISA limit to £20,000.
Contributions can be made with the 25% government bonus paid up to the age of 50.
The chancellor said that savers would be able to withdraw money from a Lifetime Isa at any time, and would not pay any tax on it.
Yes but a Government bonus from both the Help to Buy ISA and a Lifetime ISA can’t be used to buy a home.
Joanne Segars, chief executive at the Pensions and Lifetime Savings Association (PLSA), added: “The introduction of a Lifetime Isa is an interesting initiative to help younger people add to their pension and lifetime savings”.
“This builds on a policy that our savings and investments policy project has been calling for as a means to encourage more people to save whilst also trying to buy a house”. This will really only benefit those with chunky savings pots, especially as the Chancellor has already given everybody a new Savings Allowance from next month, which allows £1,000 of interest to be earned tax-free.
However, it’s important to remember that you really do need to be committed to one of these goals, as taking the money out before your 60 birthday for anything other than a house purchase will result in a hefty charge of 5%, and you won’t get the Government bonus, either.
‘According to announcements, the government top up to LISA (max £1000 a year) will be paid at the end of the tax year, so a fairly big lag.
By contrast, anyone paying a lower rate of tax in retirement than in work is likely to find that the higher upfront tax relief on a pension, coupled with the lower income tax on withdrawals, will make a pension more attractive.
The increase in the annual ISA allowance to £20,000 in 2017 from the current level of £15,240 is extremely good news for investors.
Accounts are limited to one per person rather than one per home, so two first-time buyers can both receive a bonus when buying together. That cash and bonus is available tax-free to buy a first home or after the age of 60.
You can also take money out of an Isa and pay it back within the same tax year.
Huw Evans, the director general of the Association of British Insurers, said: “The test for success for the lifetime Isa will be whether it increases overall retirement savings and does not undermine the auto-enrolment programme”. You can do with this money whatever you wish – use it to live off, go on holiday, by an exotic pet, you get the idea.
Can my partner inherit my Lifetime Isa? But what is this new ISA and are you eligible to open one? There’s no stipulation that you have to save the maximum £4,000 per year, so essentially, the Government will give you a bonus of 25% on anything you’re able to squirrel away.
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There was a rise in the insurance premium tax, to 10 percent from 9.5 per cent, but it wasn’t as large as the 3 percent some had feared, limiting the impact on motor renewal prices.
