The Help to Save scheme
A consultation on the launch of the new Help to Save scheme recently closed. The new scheme will allow anyone in work and in receipt of Universal Credit or Working Tax Credits to save up to £50 a month and receive a 50% bonus after 2 years that can be worth up to £600. The scheme is expected to be in place by April 2018.
As things currently stand, account holders will then be able to continue saving under the scheme for a further 2 years and receive another £600 bonus. This could see those on low incomes receive a bonus of up to £1,200 over 4 years. The new scheme will be open to all adults in receipt of Universal Credit with minimum household earnings equivalent to 16 hours at the National Living Wage or those in receipt of Working Tax Credits.
The Low Income Tax Reform Group (LITRG) has recently published a press release urging the government to ensure that the Help to Save accounts be free from income tax. This was in response to the fact that the tax status of the scheme was not covered in the consultation document.
Anthony Thomas, Chairman of LITRG, said:
‘We strongly recommend that there is a specific exemption written into tax law to exclude both the government bonus and any interest on the accounts from income tax to make the Help to Save accounts simple, accessible and cost-effective for accountholders and HMRC.’
The LITRG was also concerned that the £2,000 cap on prior savings in order to be able to access Help to Save was too low and urged the government to increase the cap to £6,000 or more.
It is thought that as currently drafted the Help to Save scheme could benefit an estimated 3.5 million people across the UK. It will be interesting to see what shape the scheme takes when it is finally launched.