Tax change supports low-earning savers

Low earners will benefit from plans introduced in a raft of tax changes to help them boost their savings.

The Government has published 23 technical tax updates, many of which simplify and modernise the tax system.

Among the changes is a reform to the Help to Save scheme, introduced for working people on low incomes who are claiming certain benefits.

There will be changes to how its bonus is calculated, the length of time an account can be open for and eligibility requirements, all with the aim of enhancing long-term savings habits.

Help to Save was launched in 2018 and allows certain people entitled to Working Tax Credit or receiving Universal Credit to get a bonus of 50p for every £1 they save. Accounts can be open for a maximum of four years and savers can put a maximum of £50 into their accounts every month.

Since the scheme began more than £255 million has been saved through it and the Government wants to encourage more people to open accounts.

Victoria Atkins, Financial Secretary to the Treasury, said: “Rising prices are putting household budgets under strain – and it’s in tough times like these that many people turn to their savings.

“We want to support savers and make sure the tax system provides them with the options they need to shore up their finances, helping them through rainy days as well as helping them plan for the future.

“A simpler tax system will also help deliver on the Prime Minister’s priorities of creating economic growth and reducing our country’s debt.”

The Government also wants to address the fact that some parents who have not claimed Child Benefit could miss out on building their state pension. Those affected will in future be able to claim National Insurance credit retrospectively as ministers move to tackle this issue.

When parents claim Child Benefit, they can also receive a National Insurance credit which helps them build their State Pension. This is aimed at those who, due to caring responsibilities, are out of work or not earning enough to pay National Insurance, to ensure they are still able to do that.

Parents do not need to take any action immediately. The Government intends to legislate to allow eligible individuals to retrospectively claim National Insurance credit, and the next steps to be taken will be published in due course.

 

Since the closure of the Office for Tax Simplification the government has committed to putting simplification at the heart of all tax policy making.

If you need help to find out what you are eligible for, talk to us.

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