View more on these topics

IFS questions housing link for Lifetime Isa

Bricks building housing construction

The Institute for Fiscal Studies has questioned the thinking behind the new Lifetime Isa, which was revealed by Chancellor George Osborne as part of the 2016 Budget.

The new savings vehicle will take the place of the Help to Buy Isa launched by the Chancellor as part of his 2016 Budget, and will offer savers a 25 per cent top-up on contributions of up to £4,000 per year.

It can be accessed to either buy a first time home under £450,000, or after age 60 to help to fund retirement.

However, the IFS has today questioned the link to buying a home.

IFS senior research economist Stuart Adam says: “It is not clear what the rationale is for encouraging people to save for a home, rather than anything you might want to spend money on before retirement.”

The IFS has also attacked the Chancellor for “disingenuous” comments around changes to the income tax regime, which introduced increases to both the personal allowance and the higher rate threshold.

Osborne announced that the personal allowance will reach £11,500 by next April as part of a pledge to reach £12,500 by the end of the parliament, while the 40p tax threshold will move from £42,385 to £45,000.

In particular, the IFS has slammed the Chancellor’s claims that the move to raise the personal allowance will mean “1.3 million of the lowest paid taken out of tax altogether.”

IFS director Paul Johnson says: “No it does not mean that. Taken out of income tax, yes. But not taken out of direct taxes on income. It remains the case that National Insurance contributions, which are just another tax on earnings, start to be paid once earnings rise above about £8,000. Low paid workers are not taken out of tax by raising the personal allowance.”

And Johnson also questions the value of the Government’s new Help to Save scheme, which will launch in 2018, allowing savers with working tax credits or universal credit to save up to £50 a month and pocket a bonus of 50 per cent, earning a maximum of £600 after two years.

He says: “Help to Save has a lot in common with the old Saving Gateway policy.

“When that was abolished – by none other than Mr Osborne – we at the IFS congratulated ourselves on the impact of our evaluation of the policy, which found no evidence that it increased total saving among the target group. We are not aware of any new evidence on this point.”

Recommended

2014-George-Osborne-Holds-Budget-Box-700.jpg

Osborne unveils lifetime Isa for house purchase or retirement

The Government is to introduce a lifetime Isa to allow consumers to choose whether to fund their first property purchase or their retirement from next year. From April 2017, people under 40 will be able to contribute up to £4,000 a year into the new lifetime Isa.  The Government will top up savings by £1 […]

George-Osborne-delivers-the-Budget-2014-700.jpg

Osborne to raise £12bn in tax avoidance crackdown

Chancellor George Osborne has laid out plans to raise £12bn by the end of this Parliament through a package of measures to target tax avoidance. In today’s Budget, the Chancellor said the Government will introduce new measures to tackle disguised remuneration, and make sure UK tax is paid on property development. The Treasury will seek […]

barclays-building-2012-700x450.jpg

Barclays cuts rates by up to 30 BPS

Barclays is cutting rates on its residential and buy-to-let product ranges by up to 30 basis points. Barclays is introducing a buy-to-let 2.29 per cent two-year fixed product at 75 per cent LTV with a 1 per cent fee, available for loans of £100k to £1m. The lender is also bringing in a 3.39 per […]

George-Osborne-direct-photo-700.jpg

Osborne slashes corporation tax to 17%

Chancellor George Osborne has again taken the axe to corporation tax, with the rate set to fall to 17 per cent in 2020. The corporation tax rate is currently 20 per cent. Under existing plans was due to fall to 19 per cent in April 2017 and 18 per cent by 2020. However, giving his […]

HMRC helping to remove artificial gains

An investment bond offers investors certain tax advantages, one of which is the ability to take partial surrenders from the investment. This facility allows the policyholder to withdraw amounts up to 5% of the amount invested each policy year on a tax deferred basis, without incurring any immediate tax liability. This tax deferred allowance can […]

Newsletter

News and expert analysis straight to your inbox

Sign up