Chancellor George Osborne today announced the Government's 2013 Budget. Key highlights include a new scheme to boost homeownership for those with low deposits that will be open to both first-time buyers and those moving up the housing ladder and new tax-free childcare vouchers for working families.
Announcing the Help to Buy scheme, George Osborne said all buyers with a 5% deposit to put down on a new-build home will be eligible to borrow an equity loan from the Government worth up to 20% of the home's value. This 'shared equity' loan will be interest-free for the first five years and repayable when the home is sold. This will then enable buyers to access at least a 75% loan-to-value mortgage (if they only have a 5% deposit) from an eligible bank or building society. Whereas the scheme's forerunner, FirstBuy, was only open to first-time buyers and had an income limit of £60,000, Help to Buy has been extended to those already on the property ladder and has no income limit.Commenting, the Council of Mortgage Lenders said: "Because it will take some months to design and put the scheme in place, the benefits will not be immediate. "However, a successful scheme could ultimately enable lenders to offer more low-deposit loans than they would otherwise be able to do without incurring concerns from funding markets, prudential regulators, or their own internal risk committees."During the Budget announcement, Mr Osborne also revealed that a new £130-billion mortgage guarantee scheme will be introduced in January 2014 and run for three years aimed at improving mortgage availability to those with small deposits.The Government-backed mortgages will be open to both first-time buyers and existing homeowners, and will be able to be used to fund the purchase of both new and existing homes.
From April 2014, the personal allowance (the amount of income you receive before being taxed) will rise to £10,000. In the Autumn Statement last year, the Chancellor announced that the personal allowance will increase to £9,440 in April 2013.
A new Tax-Free Childcare Scheme will also be launched. This will see working families receive childcare vouchers worth £1,200 per child per year.
Before George Osborne made his Budget 2013 announcement there was much speculation that measures would be announced to allow funds held in Child Trust Funds (CTFs) to be transferred into a Junior ISA.
The Government has, however, announced no definite plans on this, but will be opening consultation to discuss the matter.
Junior ISAs were introduced in November 2011 as an alternative to CTFs. They are open to children under 18 born before 1 September 2002 or after 2 January 2011. Much like adult ISAs, they allow up to £3,600 per year to be deposited tax free into either a cash Junior ISA or Stocks & Shares Junior ISAs.
Launched in April 2005, CTFs were eligible for children born between 1 September 2002 and 2 January 2011. Initially, the Government would give out vouchers of £250 when a CTF was opened; however, this voucher scheme has since ended. CTFs allow up to £3,600 to be deposited per year.
Since the launch of Junior ISAs, the Government has faced pressure to allow funds to be transferred from a CTF into a Junior ISA as the rates on CTFs are often not as competitive.
"The announcement that the Government is to consult on options to allow the transfer of Child Trust Funds into Junior ISA is welcome," said Tom Stevenson, investment director, Fidelity Worldwide Investment.
"Children with CTFs should have the same investment opportunities as those children who already hold a Junior ISA. One of the main attractions of ISAs is their simplicity but this benefit was reduced by having the CTF and Junior ISA schemes running in parallel."
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