On the Money: Budget’s spring clean for savers
Tomorrow’s last-ever March Budget is likely to be a quiet one in terms of shocks, especially as we’ll be facing another one later in the year as the event switches from spring to autumn.
On top of that, the Chancellor, Phillip Hammond, used December’s Autumn Statement to lay out the tax changes that will affect most of us from next month.
But that doesn’t mean there won’t be significant announcements. Business rates, social care and taxation of the self-employed are likely to top the agenda, says London accountant EY.
So small businesses and those involved in the gig economy could be worse off after Hammond’s announcements, but what about the rest of us worried about being squeezed?
For savers, there’s already been plenty of good news announced to look forward to.
For instance the Isa tax-free allowance is climbing to £20,000 from April 6 from its current level of £15,240. It means a couple can stash away £40,000 between them in shares, funds or deposit accounts and pay no tax on the proceeds.
For less well-heeled savers, there could be an announcement in the Budget of the rate paid on the new “market-leading” three-year Investment Guaranteed Growth Bond from National Savings & Investments. The bond will be offered to savers with between £100 and £3000 to lock away.
It was announced in the Autumn Statement when it was indicated the rate paid would be around 2.2%, but we are waiting to hear whether the actual rate paid will be higher or lower, or, indeed, 2.2%. Either way, it should be attractive to savers fed up with the 1% or so they may be getting with the best traditional high street accounts.
Also next month, we’ll finally see the introduction of the Lifetime Isa, the much-hyped saving scheme that will give some savers a new government handout. To get it, you need to be under 40 years old now, and then you’ll be allowed to save up to £4000 a year until you reach 50. If you use the cash towards a deposit or as a pension, you’ll get a 25% bonus from the government.
All workers should start to be slightly better off from April as the amount you can earn before income tax becomes due is climbing. The personal allowance will rise from £11,000 to £11,500 next month and the Government has promised to increase it to £12,500 by 2020-21.
Meanwhile, the threshold for the higher 40% income tax rate will rise from £43,000 to £45,000 in April.
Lower-paid workers will be better off, too. The minimum wage for those aged 25 and over will go up from £7.20 an hour to £7.50.