Last week the Chancellor announced big changes in savings, tax and housing, but how does this budget actually affect you, we take a look.
The Lifetime ISA, revealed by Mr Osborne last week, is a tax free savings account for those under 40 years old that the Government tops up each year by 25%. You are allowed to save up to £4,000 a year, which would generate you an additional £1000 bonus from the government.
Savers can use the money towards buying their first home, or can put it towards their retirement savings.
Provided certain terms are met the cash can be withdrawn tax free. For home purchases you will receive all the money including the government bonus. Those who want to use it when they retire will also receive the full amount provided they are over 60. However, although withdrawals can be made for something else at any time the bonus element of the savings along with any interest must be repaid to the government along with a 5% charge.
Provided you are under the age of 40 you can start saving into a Lifetime ISA from Aril 2017.
First Time Buyers
The cash raised by taxing landlords the Government has promised will be used to create new homes for first-time buyers. And those saving up for a deposit with a Help to Buy ISA will be able to move their money into a Lifetime ISA.
The higher rate of capital gains tax has been cut from 28% to just 20%. This comes into effect from April.
The earnings threshold at which you start paying income tax has risen from £10,600 to £11,500. George Osborne said ‘this means 1.3m of the lowest paid are taken out of tax altogether’. High Earners who currently pay 40% tax will benefit as the threshold at which the 40% kicks in has risen from £42,385 to £45,000 from April 2017.
The Government is increasing the threshold of business rates to £15,000, and by 2020 will be cutting corporation tax to 17%. George Osborne said ‘From April next year 600,000 small businesses will pay no business rates at all. That is an annual saving of nearly £6,000 a year’.
Mr Osborne is continuing to freeze the fuel duty so we shouldn’t see a rise in petrol prices too soon.
There had been rumours that tax relief on pensions would be reduced for some of the highest earners, the Chancellor however confirmed there would be no changes.
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Home>Blog> The 2016 Budget-How the changes will affect you