Chancellor George Osborne has announced a raft of Budget 2016 measures to encourage saving for old age.
The annual ISA limit is to rise from £15,000 to £20,000, there will be a new “lifetime” Isa for the under-40s, with government putting in £1 for every £4 saved and there will be a new state-backed savings scheme for low-paid workers, worth up to £1,200 over four years.
The Money Advice Service, which has provided financial advice to consumers since 2010, is to also be abolished.
Meanwhile, some changes announced last year come into effect next month meaning UK savers will see radical change to the way their nest-eggs are taxed.
Anyone who earns interest on a savings or current account will no longer have 20% tax automatically deducted by their bank or building society.
They will instead be subject to a new Personal Savings Allowance (PSA), allowing them to earn up to £1000 a year tax-free.
As a result of the changes – announced in last year’s Budget – the government says that 95% of us will no longer have to pay any tax on savings.
In total, individuals will benefit by more than £1bn – the cost to the Treasury in 2016/17.
Basic rate taxpayers (20%) will be allowed an annual income of £1,000 in interest before they pay any tax. Those on the higher rate (40%) will have an allowance of £500 in interest.
Those on the top rate (45%) will have no allowance at all.
In the meantime those who earn less than £17,000 (including their savings income) will not have to pay any tax at all.