Some called it the true blue budget and others the chancellor’s war on the welfare state. But at last week’s balancing of the fiscal books, the chancellor wielded the axe at billionaires as well as benefit claimants, with a number of headline-grabbing measures around personal finance.
These included changes to the taxation of buy-to-let mortgages that will hit wealthier landlords, a reduction in the tax relief on pensions that will hit those earning more than £150,000, and increases to insurance tax that will undoubtedly result in more expensive home and motor premiums. But there were also some hidden nuggets the chancellor either didn’t mention or didn’t elaborate on. Here are some that might affect you.
In the last coalition budget, the chancellor announced the introduction of a help-to-buy Isa designed to help first-time buyers. At the time he said it would be launched in the autumn. Last week’s budget revealed this has been put back to 1 December.
“The confirmation of the launch date should inject fresh first-time buyer capital into the UK residential property market,” said property investment consultant Simon Morris.
Those saving for a deposit for their first home will be able to put up to £12,000 into the Isa, which the government will top up with £3,000. This bonus will be paid to the saver only when they come to buy a home. The Isas will be available from participating banks and building societies.
In the March budget the coalition also announced a change to the Isa rules that will allow individuals to withdraw and replace money from their cash Isa in the same tax year without it counting towards their annual Isa limit. Last week’s budget says this policy will also cover cash held in stocks and shares Isas. The changes will start in April 2016.
Savers who make money from peer-to-peer (P2P) lending through websites such as Zopa will be able to put these loans into a new innovative finance Isa from April 2016.
According to research from money.co.uk, 40% of people say they would invest in a P2P product if they could do so under their tax-free Isa allowance. “People might be put off by the fact that many of these products are quite complicated,” said Hannah Maundrell, editor in chief of the website.
“If they are going to take off, I think simplification is key. You can’t escape the fact there are some great returns but, as with all investments, these accounts are not without risk.”
Behind the headlines generated by the budget was the news that the government is extending the reach of its Pension Wise guidance service to cover people aged between 50 and 55.
The service was set up to offer advice to those aged over 55 who are eligible to access the money from their retirement pots under the pension freedoms introduced in April.
The government has also put back plans for its launch of a secondary annuity market which, when implemented, should allow people with existing annuities to sell them back to their provider.
It will consult on this in the autumn with a view to launching it in 2017. Pensions minister Ros Altmann said the delay was to “ensure consumer protection”. “We can’t launch without safeguards,” she said on Twitter.
“The government has listened to industry feedback relating to pensions,” said Mike Smedley, pensions partner for KPMG. “It has recognised that annuities are a complicated area and has decided to delay implementation of a secondary market to allow enough time to get it right.”
The government also announced it will shut the Equitable Life payment schemeto new claims at the end of the year. It was set up and run by the government to make payments to Equitable Life policyholders who suffered losses as a result of government maladministration in the regulation of the now defunct insurance giant.
There are about 136,000 people who haven’t claimed, but government efforts to trace them have drawn a blank. It said it will make a last ditch effort to trace policyholders owed £50 or more.
In good news for the worst-off ex-Equitable Life members, the chancellor said: “We are going to use the remaining funds available in [the scheme], as it closes, to double the support we give to those policyholders on pension credit who most need this extra help.”
Claims management companies
The government announced a fresh crackdown on claims management companies, which have been accused of contributing to the rising cost of motor insurance premiums.
The chancellor said a review will take place into their regulation and will report back in spring 2016. He also announced his intention to bring forward proposals to cap their fees.
The Association of British Insurers welcomed the announcement. “Poorly regulated claims management companies have been hiking up the cost of insurance for far too long,” said director general Huw Evans. “The government is right to tackle this aggressively and to ensure the system rewards customers who behave truthfully.”