Mass changes to savings products were announced in this week's budget including a new Help to Buy Isa, extensions to the flexibility of Isas and a tax-exempt Personal Savings Allowance.
Chancellor George Osborne announced an extension to the government's Help to Buy scheme with a new Help to Buy Isa for first-time buyers, pledging to top up monthly savings by 25 per cent, translating into a £50 bonus on each £200 of savings.
The new product, which goes lives in the autumn, could mean a government giveaway of up to £3,000 on maximum savings of £12,000 for a first time buyer, tax free. Savers will be able to make a maximum initial deposit of £1,000 into the new account and then deposits of up to £200 a month, receiving a £50 government top-up, up to the £12,000 limit. The bonus will be paid out when buyers purchase their first home and applies to properties of up to £450,000 in London and up to £250,000 outside London.
The accounts will be available for four years but once opened there is no limit on how long savers will be able to pay in. They will also be linked to individuals rather than homes - meaning two people buying a first home together could both qualify for the bonus. But each first-time buyer is allowed just one Help to Buy Isa during the duration of the scheme and the rules mean savers will not be allowed to take out a Help to Buy Isa with one provider and cash Isa with another.
Individuals will also be able to withdraw and replace money from their Isa without going over their Isa subscription limit under new rules aimed at making Isas more flexible, as long as the withdrawal and repayment are made in the same tax year. The government has also extended the eligibility of Isa investments.
Listed bonds issued by co-operatives and the community benefit societies and SME securities listed on recognised exchanges will be eligible for inclusion in Isas from summer 2015. Further debt and equity securities offered via crowd funding platforms could also be included after a consultation in summer 2015, when the government will also publish a response on how to incorporate peer-to-peer loans into Isas.
Mr Osborne also unveiled a new personal savings allowance of £1,000 for basic-rate taxpayers and £500 for higher-rate taxpayers in this week's announcement, claiming 17m people would see tax on their savings abolished from April 2016. "People should be trusted with their money," he said.
From April 2016, banks and building societies will stop automatically taking 20 per cent in income tax from the interest earned on non-Isa savings. The announcement means that those with a taxable income of less than £16,800 will not have to pay tax on the interest earned on savings from April 2016.
