Help to Save tax treatment under scrutiny
2nd August 2016
Earnings from the Help to Save scheme should be exempt from income tax, according to the Low Income Tax Reform Group (LITRG).
The savings scheme was announced in Budget 2016 for working adults on low incomes and in-work benefits such as universal credit.
Individuals can save up to £50 a month alongside a 50% government bonus after 2 years.
The scheme will be open to adults whose minimum weekly household earnings are above 16 hours at the national living wage.
LITRG has asked the government to explore ways to help people save including:
- allowing people to put part of their universal credit into Help to Save accounts
- allowing employers to pay a portion of wages into the scheme.
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.
“There must be clear and easily understandable guidance on the pros and cons of Help to Save compared to pension contributions.”
Talk to us today about your personal finance planning.