The recent spring budget, saw the announcement of the new Lifetime ISA becoming available next year.
It will enable people under 40 to save towards a first home or retirement.
Lifetime ISA account holders can save up to £4,000 per year with the Government providing a 25% bonus on your contributions at the end of the tax year. This could mean £1,000 bonus a year for those who save the maximum amount.
When you consider you can make contributions and receive bonuses between the ages of 18 to 50, you could, in theory, end up with £32,000 of bonuses. There isn’t any other savings account that comes close to a 25% interest rate!
And if you decide to keep your money towards your retirement fund, you can take out all the savings tax free on your 60th Birthday. Currently, most pension schemes only allow you to take 25% of your pension pot tax free. Likewise, the Lifetime ISA seems a good option for self-employed people who don’t have a private pension.
If you’re not young enough to take advantage of the Lifetime ISA, the Government announced a significant increase in the overall ISA contribution to £20,000, so there’s tax efficient savings for everyone.
You can print out your own copy of this fact sheet, outlining all you need to know about the Lifetime ISA.
Capital Gains Tax
Back in 2010, during the first ‘Emergency Budget’, a two tier system of Capital Gains Tax was introduced. Basic taxpayers continued to pay 18% while higher and additional tax rate payers paid 28%.
In the most recent spring budget, it was announced that Capital Gains Tax will be reduced from 28% to 20% for higher and additional tax rate payers, and the basic rate from 18% to 10%.
Capital Gains Tax is paid on the profit you make when you sell, gift or swap an asset that has increased in value and includes personal possessions (such as paintings), some shares and property that isn’t your main home (for example a flat you rent to someone else).
There are exceptions to this reduction including buy to let investors and recipients of ‘carried interest’, which we can discuss with you.