Help to Buy: ISA
The Help to Buy ISA is a tax-free savings scheme, designed to help first time buyers save up enough money for a deposit on their first home.
With the scheme, which will run until autumn 2019, the government will contribute an extra 25% on top of your savings. You can save a maximum of £200 per month, as well as an initial £1,000 deposit. So, in the first month, you could save £1,200 on top of which the government will add an extra £300.
If you pay in the maximum £1,000 deposit as well as £200 every month until you reach £12,000, you’ll get a bonus of £3,000 – which gives you an overall total of £15,000. You can claim the bonus as soon as you’ve saved £1,600, which would mean a £400 bonus.
You can open a Help to Buy ISA with a bank or building society, just like a normal cash ISA. Once you’ve opened an ISA, you can pay into it for as long as you like, and there are no limits on when you can use your bonus.
Who is eligible for a Help to Buy ISA?
If you’re a first time buyer, you can open up a Help to Buy ISA, as long as you’re over 16, even if you’re buying a property with someone who isn’t a first time buyer. You can’t get a first time buyer ISA if you plan to rent out the property, or if you’ve previously owned or inherited a property in the UK or abroad.
You can’t have a Help to Buy ISA and a regular cash ISA in the same tax year. If you’ve opened up a new cash ISA (or paid into an existing one) in the current tax year, you won’t be able to open a savings account as a first time buyer until the new tax year.
Help to Buy ISA FAQ
Here are some of the most commonly asked questions about Help to Buy ISAs:
Can I switch banks?
Just like a regular cash ISA, you can switch providers. So keep an eye out on the rates offered by the other banks and building societies!
How will my bonus be paid?
The bonus will be paid only when you buy your first home, in the form of a voucher which will go to your mortgage lender. So although you’re free to use the Help to Buy ISA as a regular savings account, you won’t benefit from the bonus unless you actually buy a house.
Will I earn interest on the bonus?
As the bonus will only be paid after you’ve bought your first home, the bonus won’t accrue any interest.
Can I continue saving after I’ve reached £12,000?
Yes, and you’ll continue to earn interest on any amount you pay in, but the maximum bonus you can receive is £3,000 so you may wish to continue saving in an account which offers a better interest rate.
Can I use the Help to Buy ISA to buy any home
Unlike the Help to Buy loan, this ISA for first time buyers can be used to buy a home which is either brand new or has already been lived in. However, it is only available on properties which cost up to £450,000 in London and £250,000 anywhere else in the UK.
Can I have more than one Help to Buy ISA?
Unlike other ISAs where you can open a new one every year, you can only have one Help to Buy ISA, but you can continue to pay into it every year. And what’s more, if you’re buying with a partner or a group of friends, each person is entitled to open up an account, meaning you could double or triple the bonus you receive from the government towards your deposit.