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2015 Budget overview

Many of us in the peer-to-peer finance industry were hoping for concrete news of a P2P ISA in this week’s Budget, but the Treasury appears to have pushed back its final decision on tax-free lending until the summer.

So what else did the Budget have to offer?

Savings reforms

Most of the headlines were devoted to reforms of the savings system, which will cut tax bills by up to £200 a year.

From next April, most people will be able to earn £1,000 interest a year before income tax is due – higher-rate taxpayers will only be able to earn £500 tax-free however, but this will still provide them with a £200 tax cut.

There will also be new flexibility introduced to the cash ISA system, which will allow holders to withdraw and re-deposit money in the same financial year without losing tax-free benefits or eating into their annual allowance.

More Help To Buy

The Help To Buy mortgage scheme, which provides first-time buyers with government assistance on their home loans, is to be extended to saving for a deposit.

From the autumn, the government will give a 25% bonus to any savings towards a down payment on a first home, up to a limit of £3,000. This applies to purchases of up to £450,000 in London and £250,000 elsewhere.

Higher personal allowance

The relentless rise of the personal tax-free allowance is set to continue: on top of next month’s increase to £10,600, the amount anyone can earn before they pay income tax will hit £10,800 in 2016 and then £11,000 the year after.

And in two years’ time, the threshold for higher-rate taxpayers will be lifted faster than inflation which means fewer people will pay the 40% rate than would otherwise have been the case.

Tax return scrapped

For those of us who still complete a tax return every year, there was good news: the return is to be phased out and replaced with an automatic digital system by the end of the decade.

This should mean that people with all but the most complex tax affairs should no longer have to fill in a return. Instead, tax and income information will be fed to HM Revenue & Customs on an ongoing basis – perhaps via smartphones or tablet computers – allowing tax to be paid at any time.

In theory this should prove simpler, but major government IT projects have a habit of not going quite to plan.

Cashing in annuities

The proposal has been widely trailed in advance of the Budget, but Osborne confirmed that from next year around 5 million older people will be allowed to trade in their annuities for a cash lump sum.

At the moment this is technically possible but comes with a whopping 55% tax charge.

There are a lot of potential risks around this new freedom, and the government says is it now consulting on how to make sure people don’t make the wrong decision.

Duty freezes and cuts

With the election around the corner, betting on a cut in beer duty was probably a no-brainer – and indeed, for the third year running the Chancellor cut 1p off the price of a pint.

Tax on spirits and cider will drop by 2%, while duty on wine will remain the same.

The planned rise in fuel duty scheduled for September has also been scrapped.