Conservative plans for the economy

Posted by Amy Flower in Personal Finance on 18 May 2015 - Amy is a Senior Credit Analyst at checkmyfile

David Cameron and the Conservatives have spent the last 5 years in coalition with the Liberal Democrats, making cuts and getting the economy in the position we are in today. The next 5 years in office has also been planned and has a lot in store for our finances, from income and inheritance tax to pensions; to housing and household bills.

The Conservatives have looked at income tax and decided that this allowance should increase from the current rate of £10,600 to £12,500 by 2020. They are also planning to increase the bracket for higher earners paying 40% tax from £42,385 to £50,000. They have also promised to legislate against increasing income tax, VAT and National Insurance within this parliament.

Inheritance tax plans are to allow a personal allowance to increase by an extra £175,000, which brings a couples allowance to £1m. This would be exclusively for their home with no duties to pay upon their death. If there any shares or additional finance to sort this would then be subject to the laws in place.

The current ‘Triple Lock’ arrangement in place for pensions will remain and this is to keep a 2.5% rise based on inflation, wages or earnings, whichever is the highest. The not so good news is for the wealthiest pensioners who are earning over £150,000, who will have their savings allowance reduced from £40,000 down to only £10,000. The lifetime allowance will be reduced also in April 2016 from £1.2m to just £1m.

There is now speculation over selling annuities and the rules that were introduced by the Coalition. Now being in full control, the Conservatives could decide to reverse this decision so we will wait to see what plans they have.

Housing was and still is a major issue, especially for first-time buyers and affordable housing. The Conservatives have made a pledge to get at least double the amount of first-time buyers into a home they can afford, in an area they want to live in, by the end of their term in Government.

They plan to extend their Help to Buy scheme with the new Help to Buy ISA, announced in this year’s budget from George Osborne. The ISA offers a payment of £50 per £200 saved towards a house deposit. If the saver has saved £12,000 themselves they will receive the maximum of £3,000. For low income earners who live in council or Housing Association property, the Tories have extended the Right to Buy Scheme, allowing them to purchase their rented council property and giving them the first step onto the housing ladder.

Finally household bills; there are no plans in this Government’s term to cap energy suppliers’ bills, which is not great in terms of making savings and being able to budget long term. However, there are still some good fixed rates deals to be had. There is a proposal to enable a one day switch service, so that changing suppliers is a quick and easy transaction.

Commuters have had their rail fares frozen and regulated fares will be capped to stay in live with RPI. There is another element of train fares, that allows a rail line to increase their fares by 5.5% but this still has be remain lower than RPI’s 1%. Meanwhile, fuel duty is still frozen and has been since March 2011, although a planned rise in line with RPI was predicted for September and has since been scrapped.

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