The Salary Calculator

In yesterday’s budget, the Chancellor George Osborne outlined his plans for the next couple of years. In terms of take home pay from April onwards, there were no real surprises – the personal allowance has been increased and the top “Additional rate” tax has been reduced from 50% to 45%. In an earlier blog post I have described how these changes have been applied to The Salary Calculator.

Those who are repaying their student loan could be saving as much as £50 next year, as the threshold for repayment has increased from £15,795 to £16,365 – so the deductions from their salary will be less from April. However, the flip side of this is that because less of the loan is being repaid, it will take longer for the loan to be paid off in full and therefore will cost more in the long term.

What I found most interesting about the Chancellor’s announcements yesterday was the extension of an existing scheme for people buying their first house (FirstBuy) to allow more people to take part. The new scheme is called Help to Buy, and will help people to buy a new-build home with a 5% deposit, even if they can’t get the rest of the 95% from a mortgage lender. The government will provide a loan (interest-free for 5 years) for up to 20% of the value of the house, leaving buyers to find only 75% from a mortgage lender. In return, the government will get a share of the equity in the house – so if the house price increases, the amount repayable when the house is sold will increase at the same rate. This scheme is available to first-time buyers and to people who are already on the housing ladder – it does not have to be your first house purchase – and the value of the house can be up to £600,000.

There is also a scheme to help people buy houses which are not new-built, where instead of providing some of the money, the government will guarantee some of the mortgage so that if the buyers default, the lender gets some of the money from the government. This is aimed at encouraging lenders to allow people with small (5%) deposits to borrow.

If it takes off, this scheme has the potential to help people who are currently struggling to buy a home because they don’t have a large enough deposit. It may also help to stimulate the house construction industry, and bolster a flagging property market. The treasury has provided an infographic with some details.