The product, which he said “combines two of our most successful innovations” in the liberalisation of Isas and the Help to Buy mortgage scheme, will give first time buyers that save up to £200 a month towards their first home an uplift of £50 within the tax-relieved environment.
Speaking earlier today (18 March), George Osborne promised he would work with industry so the account is ready for this autumn, “and we’ll make sure you can start saving for it right now”.
He stated that a 10 per cent deposit on the average first home costs £15,000, so if people put in up to £12,000 the government will contribute up to £3,000 more.
The minimum bonus is £400 per person and the maximum bonus is £3,000 per person, available on home purchases of up to £450,000 in London and up to £250,000 outside London.
“A 25 per cent top-up is equivalent to saving for a deposit from your pre-tax income – it’s effectively a tax cut for first time buyers,” Mr Osborne commented.
The new accounts will be available for four years, but once individuals have opened an account there’s no limit on how long they can save for.
A statement from the Treasury explained that accounts will be available through banks and building societies from this autumn, with no minimum monthly deposit.
The announcement came alongside a new Flexible Isa, which will end the policy of people who take their money out losing their tax free entitlement.
The account, which Mr Osborne said builds on the opening up of pensions in the last Budget, will give people complete freedom to take money out and put it back in later in the year, without losing any of their tax-free entitlement.
“It will be available from this autumn and we will also expand the range of investments that are eligible,” Mr Osborne added.
The full Budget document detailed that following technical consultation with the industry, the government will extend the range of Isa-eligible investments in 2015-16 to include listed bonds issued by a co-operative society or community benefit society and SME securities issued by companies trading on a recognised stock exchange.
It will also explore further extending the list to include debt and equity securities offered via crowd funding platforms, consulting this summer alongside a response to the consultation on how to include peer-to-peer loans.
A final reform to help boost savings came in the form of a new personal savings allowance that will take 95 per cent of taxpayers out of savings tax altogether, which formed the final flourish of the speech but which had been trailed by the Independent this morning.
He explained: “From April next year the first £1,000 of the interest you earn on all of your savings will be completely tax-free. To ensure higher rate taxpayers enjoy the same benefits, but no more, their allowance will be set at £500.”
Mr Osborne said that this will mean 17 million people will see the tax on their savings not just cut, but abolished. “At a stroke we create tax free banking for almost the entire population,” he added.
peter.walker@ft.com
