Budget July 2015 (4) – Tax Efficient Investments

 

 

ISA

• The ‘Help to Buy’ ISA will be available from 1 December 2015. This new product will enable first time buyers to save up to £200 per month towards a first home, with an initial one-off deposit of £1,000. The Government will boost savings by 25% up to a maximum of £3,000, which will be paid when a property is purchased.

 

• The Government confirmed its commitment to introduce new flexible ISA rules from 6 April 2016. The rules will allow investors to pay withdrawals from a cash ISA back in to the account before the end of the tax year, without reducing their subscription limit further. The change will also cover cash held in stocks and shares ISAs.

 

• The Government will introduce the Innovative Finance ISA, for loans arranged via a peer to peer platform, from 6 April 2016. It is also consulting on whether to extend the list of ISA eligible investments to include debt securities and equity offered via a crowd funding platform.

 

Personal Savings Allowance

•  From 6 April 2016, a tax-free savings allowance of £1,000 will be available to those with taxable income of less than £43,000 i.e. basic-rate payers and below. Higher rate taxpayers benefit from a £500 tax-free allowance. Those earning over £150,000 are not entitled to an allowance.

SEIS, EIS and VCTs

• The Government announced a range of essentially more restrictive technical changes to the rules governing investments eligible for Venture Capital Trusts (VCTs) and Enterprise Investment Schemes (EISs).

 

GENERAL IMPACT

• ‘Help to Buy’ ISAs are sure to boost the property market further alongside other initiatives such as the initial ‘Help to Buy ‘scheme.

 

• The personal savings allowance provides more incentive for savers with even higher rate taxpayers benefiting from an allowance. However, it’s most generous for low earners who will potentially pay no tax on their savings where total taxable income is less than £17,000 in 2016/2017. This has increased from £16,800 when originally announced, as a result of the further increase in the personal allowance to £11,000.

 

• New flexible ISA rules allowing cash withdrawals to be returned to an ISA by the end of the tax year will help to maximise the benefits by removing an effective penalty on those who are forced to access their savings temporarily.