An inheritance tax cut, help to buy a home and pension freedom to stay: What the Conservative election win means for your money
05-08-2015
- Commuter rail fares frozen
- Yearly tax-free personal allowance to rise from £10,600 to £12,500
- Welfare spending to be cut by £12billion
By Rachel Rickard Straus for Thisismoney.co.uk and Simon Lambert for Thisismoney.co.uk
The final results are not quite in, but the Conservatives have scored a surprise election victory overnight.
Politicians have been making pledges, bribes and assurances left, right and centre over recent weeks in an attempt to snatch votes in what was believed to be the tightest election in a generation.
So what does the Tory win mean for your money?
The pledges the party made will affect Britons regardless of their life stages: pensions changes made now will affect workers today in decades to come; first-time buyer policies will affect the market for all homeowners, landlords and renters.
We go through some of the most significant proposals.
Promises, promises: The Conservatives have won the most seats in the election - so what will they do?
1. You could pass on your home to loved ones without worrying about inheritance tax
The Conservatives promised a new £175,000 per person transferable allowance for married couples and civil partners when their main residence is passed down to children on death.
This would mean that – combined with the existing £325,000 nil-rate band each person has on death, parents would be able to pass on property worth up to £1million free of inheritance tax.
2. Your take-home pay could go up
Your yearly tax-free personal allowance would rise from £10,600 to £12,500 under a Conservative government.
If you’re a higher rate taxpayer, you could also see more money in your pay packet thanks to a pledge to raise the 40 per cent threshold from its current level of £42,386 a year to £50,000.
The Conservative party has pledged vehemently that you would not see income tax rise, nor National Insurance contributions, nor VAT.
Lower-paid workers would also be slightly better off as the party has also vowed to raise the minimum wage to around £8 an hour in the next five years.
However unlike Labour, the Conservatives made no pledges to end zero hours contracts.
David Cameron's pre-election inheritance tax pledge
It pays to vote: Workers will see their yearly tax-free personal allowance go up to £12,500 from £10,600
3. You could get cash to buy a house
Looking up: Each party has made pledges to help first-time buyers
First-time buyers were promised access to all sorts of schemes to help them on to the property ladder, regardless of which party gained power. Each promised to build more homes to increase supply and had other initiatives to make homeownership more affordable.
In the short-term, these could provide a real boost to first-time buyers.
However critics have argued that offering more cheap cash to buy homes will only boost demand and therefore prices in the long-term, making homeownership even less affordable eventually.
The flagship Conservative policy is that tenants of housing association properties would be able to buy their home at a big discount under a new ‘Right to Buy’ scheme extension.
Aspiring homeowners under a Conservative government would have access to a Help to Buy Isa, which would top up £50 for every £200 saved towards a deposit, up to a maximum top-up of £3,000. This was announced in the March Budget.
Buyers who can scrape together a five per cent deposit could apply for a five-year, interest-free government loan equivalent to 20 per cent of a new-build property’s value under the existing Help to Buy Scheme.
This was due to be pulled next year, but would now be extended until 2020.
Alternatively a Help to Buy mortgage guarantee allows potential buyers a better chance of a mortgage to buy a home with a five per cent deposit, with the government protecting lenders if the borrower defaults.
This would now remain until 2017.
4. Pension freedom will remain, state pension will rise, but young and wealthy savers get hit
Pension freedom rules were ushered in on 6 April to give people much more flexible access to their retirement pots and they can now invest or spend it as they wish after the age of 55.
There had been concerns that a Labour government would undo some of these changes, although it was unlikely all would be swept aside. Now they should remain and be allowed to become entrenched.
Existing pensioners were set to do well, regardless of what government we ended up with.
All parties promised to keep the triple lock formula, which will see the state pension continue to rise by whichever is highest out of consumer price inflation, average earnings or 2.5 per cent.
Pensioners under a Conservative government would keep winter fuel payments for older people, and free bus passes and TV licences for all pensioners, regardless of how well off they are.
Wealthy pension savers would be stung under a Conservative government, which would restrict tax relief on pension contributions for those earning more than £150,000 by cutting the annual pension contribution allowance.
But younger pension savers are also being hit. The Lifetime Allowance is being cut to £1million, which means that there are hefty penalties for paying more into a pension once your pot reaches that size.
Most people believe this is not their problem as they will never manage to save £1million. However, many more younger workers with well paid jobs, who spend a lifetime investing and benefit from compound growth over that time, could hit this than realise.
5. Your benefits could fall
The Tories aim to cut £12billion from the welfare budget by 2017-18. However, few details on where cuts will be made have been revealed.
It has, however, pledged to cap benefits at £23,000, down from £26,000 a year, and to freeze benefits.
One change will be the removal of Jobseeker's Allowance for 18-21 year-olds, to be replaced with a Youth Allowance available for six months after which young people will have to take an apprenticeship, traineeship or daily community work for their benefits. People aged 18-21 on Job Seeker's Allowance will no longer have an automatic entitlement to Housing Benefit.
6. You could receive more free childcare
The Conservatives have pledged to double to amount of free weekly childcare for working parents with children aged three or four to 30 hours - worth around £5,000 a year.
7. The cost of rail fares could be frozen
The Conservatives have pledged to freeze commuter rail fares for five years. David Cameron said the price freeze would save commuters an average of £400 by 2020.
Annual rises in so-called regulated fares will be capped at the rate of inflation for the whole of the next Parliament, meaning costs will be frozen in real terms.
These include commuter tickets for major cities, weekly, monthly and annual season tickets, day singles and returns and long-distance off-peak return tickets.
Regulated fares were set aside after privatisation for the Government to oversee, and are those most often used by commuters who have to travel at certain times.
Unregulated fares are set by train operating companies at commercial rates, and include first-class, advance-purchase and long-distance anytime fares.
About half of rail fare revenue comes from regulated fares, the other half from unregulated fares.
Respite for commuters: Commuter fares will not rise above inflation for five years, David Cameron said
8. You will benefit if you're married
Married couples will keep the right to transfer £1,060 of their tax-free income to their husband or wife - a measure which was introduced just last month, but was set to be scrapped under a Labour government.
The tax break applies to civil partnerships as well, and the transferable amount will always rise at least in line with the Personal Allowance.
...And the changes you will not see
Tuition fees will remain at £9,000 and future rises have not been ruled out by the Conservatives. Ed Miliband had pledged a Labour government would have cut fees to £6,000.
Zero hours contracts will not be banned - a measure also proposed by Labour.
Energy bills will not be frozen for the next two years, a plan also put forward by Labour.
The so-called 'bedroom tax' will not be abolished - a system whereby tenants on housing benefit have payments cut by 14 per cent if they have an unused bedroom.
People living in expensive properties will not face a mansion tax. Labour had planned a contentious tax that was expected to cost those with homes worth £2 million to £3 million at least £3,000 a year.
Renters will not receive help scraping a deposit together. The Liberal Democrats had proposed a help-to-rent scheme, to make low-cost loans available to fund rental properties for the under 30s, repayable over one or two years.
Paternity leave will not be doubled from two to four weeks - an increase proposed by Labour.