Earnings from the Help to Save scheme should be exempt from income tax, according to the Low Income Tax Reform Group (LITRG).
The savings scheme was announced in Budget 2016 for working adults on low incomes and in-work benefits such as universal credit.
Individuals can save up to £50 a month alongside a 50% government bonus after 2 years.
The scheme will be open to adults whose minimum weekly household earnings are above 16 hours at the national living wage.
LITRG has asked the government to explore ways to help people save including:
- allowing people to put part of their universal credit into Help to Save accounts
- allowing employers to pay a portion of wages into the scheme.
Nigel Holland from Holland & Co Chartered Accountants said:
“I readily welcome the proposed reforms to the Help to Save scheme; by specifically exempting the government bonus and any interest on the accounts accrued from income tax, will help simplify guidance on the scheme, making it more accessible and cost effective for both accountants and HMRC.
Talk to us today about your personal finance planning.