Budget 2015: The New Saving Options

The majority of Osborne's announcements today were met with positivity and in particular, he focussed on the long term rather than short term plans. Alongside this, Osborne put emphasis on helping different generations plan for their own futures by making some changes to the way we save.

Osborne introduced a new personal savings allowance which will be coming into effect from April 2016, which means that the first £1,000 of interest earned on savings income is tax free for basic rate payers. For higher rate payers, the first £500 is tax free. Unfortunately, additional rate payers will not benefit from the new personal savings allowance; however, Osborne did comment that the reform will abolish the tax on savings for over 17 million people in the UK.

Recently, the Tories have been making changes to the ISA in an effort to incentivise individuals to save. The annual savings limit has been increased to £15,240 for 2015/16 which was expected from the Autumn Statement, but the interesting change is the additional flexibility that has been added to the way that ISA's will work. Previously, if cash was withdrawn from an ISA, the individual would lose that amount of money in terms of it being classed as tax-free. For example, if £15,000 had been invested into an ISA and then removed during the year, previously the savings limit would already have been used. The changes now mean that individuals can withdraw and replace money in the same tax year without it being counted as part of their annual ISA amount.

A new Help to Buy ISA has been introduced for first-time buyers which will allow the government to top up by £50, every £200 saved for a deposit! This generous bonus scheme is only available up to the first £15,000 (so if a first-time buyer saves £12,000, the government will contribute £3,000 maximum). Savings within these schemes may be withdrawn for another purpose if necessary, however, the government contribution will only be available to buy a property. Another point to note is that this Help to Buy ISA will only be available for purchasing houses of £250,000 or less throughout the UK or £450,000 or less in London, although I am not sure how far that will stretch with London prices being what they are…