Osborne revamps ISAs and rewards savers
The government could potentially contribute up to £6000 towards a couples deposit on their first home
A new Help to Buy ISA for first-time buyers will see the government contribute £50 for every £200 saved towards a deposit.
The government will continue to provide the 25 per cent top up for every saver up to a maximum of £3000.
This will be a welcome addition to the Help to Buy scheme launched under the coalition, as first-time buyers continue to struggle to purchase their first home.
Mark Hayward, managing director of the National Association of Estate Agents, has welcomed the new ISA: 'This initiative will provide a significant boost to the ability of a first-time buyer to save speedily and effectively. This is exactly what is needed to engage the first time buyer market, particularly as we have seen the current criteria under the MMR constraining aspirations to buy a home.
'It especially benefits couples who are buying for the first time as both are eligible to open a Help to Buy ISA which potentially means £6000 from the government bonus towards a new home. It is also timely, considering house price inflation out paces wage inflation, so this additional boost to first time buyers savings pots will help them at least keep apace rather than fall behind the inflationary curve.'
Additionally the annual saving limits for ISA accounts have been increased to £15,240 and they have also been made more flexible.
Savers will now be able to withdraw money from their ISAs and put it back in, without losing their tax benefits or unwittingly eroding their annual allowance.
Personal allowance
The personal tax free allowance will rise to £10,800 next year and £11,000 the year after, while the 40p tax rate trigger will climb to £43,300 in 2017-18.
The chancellor told the commons: 'That's £11,000 you can earn before paying any income tax at all. It means the typical working taxpayer will be over £900 a year better off.'
The changes have been well received and come in tandem with a tax break on the first £1,000 of interest earned on savings, and £500 for higher-rate taxpayers.
Binyamin Ali is assistant editor of Private Client Adviser