The Chancellor had little in the way of good news items in terms of mainstream investment and savings vehicles. However, the highly anticipated changes to capital gains tax rates and allowances seem to at least have been put into the “too difficult for now” box even if this turns out to be a temporary respite. The standard/adult ISA annual limits and Lifetime ISA limits remain unchanged at £20,000 and £4,000 respectively.
Following the increase at the last Budget, the Junior ISA allowance remains at £9,000. With the JISA remaining at its historically high levels, it is worth considering as part of a longer term savings strategy, and perhaps also a way of reducing a potential inheritance tax bill for parents and grandparents. As tax year end approaches, you still have an opportunity to top-up your ISA for the 2020/21 tax year if you haven’t done so already.
What we know so far about “Green Bonds”
The Budget also saw the introduction of the first “Green Bonds” although details are still to be published. Sunak first revealed plans to launch the bonds in November following recommendations from the Green Finance Institute. This initiative follows other countries such as France, Netherlands, Italy and Germany who launched its own product in September selling 6.5 billion Euros. The green savings bonds will be available through the National Savings & Investment (NS&I) scheme in a bid to drive innovation in technologies needed to reach the target of cutting greenhouse gas emissions to net-zero by 2050.
The government have said that the NS&I green bond will be available to investors in the Summer of 2021. However, the Treasury hasn’t yet revealed how much it’s hoping to raise through the bonds or what savers will get in return for investing. It could follow the premium bond structure, where savings don’t generate interest but give investors the chance to win tax-free cash prizes worth up to £1m each month, or they could just pay a fixed rate of interest.
Support for buying property
There was also good news on two fronts for those seeking to purchase property as the Chancellor confirmed the extension of the stamp duty holiday and the launch of a mortgage guarantee scheme for small deposit homebuyers.
Under the extension of the stamp duty holiday, the £500,000 nil rate band will now be available until 30 June 2021, and £250,000 until September 2021. It will return to its normal level of £125,000 on 1 October 2021.
The mortgage guarantee scheme will enable first-time buyers and homeowners to secure a mortgage with a 5% deposit on a property value of up to £600,000. The government will offer lenders the guarantee they need to provide mortgages that cover the other 95% and this will be available from April until 31 December 2022. One of the criticisms of the Help to Buy scheme, which was similar in structure to this, is that it contributed to increases in property prices and interest rates offered by the lenders were not as competitive as more standard offerings, such as those requiring 10% deposits. It will be interesting to see what the impact of this scheme will be particularly considering that those it’s designed to help are also likely to be among those whose financial position has been most affected by the pandemic.