The Help to Buy: ISA – an overview - ISAs - Guides - Moneyfacts

Guides

The Help to Buy: ISA – an overview

The Help to Buy: ISA – an overview

Category: ISAs

Updated: 05/04/2016
First Published: 01/12/2015

It's been a long time coming, but the Help to Buy: ISA is finally here! But just what is it, and how can you get involved? Here's a quick overview to give you a better understanding of what's going on.

What is the Help to Buy ISA?

The Help to Buy: ISA is a scheme designed to boost the amount you're able to save to put towards a deposit for your first home, with that extra boost being provided by the Government: if you save money into a dedicated Help to Buy: ISA, the Government will top it up by 25%. Essentially, this means that for every £200 you save, you'll receive a Government bonus of £50, up to a maximum bonus of £3,000.

You can save up to £200 per month in the ISA, and to kick-start the account, you're allowed to make an initial lump sum deposit of £1,200. You'll need to have saved at least £1,600 in the account in order to receive the bonus, however, as the minimum that can be applied for is £400, and to benefit from the full £3,000 bonus you'll need to save £12,000 of your own money – which, based on the current monthly deposit allowance, would take just over four years to achieve.

However, as an added boost, the accounts are available to individual first-time buyers and not individual households, which means that both you and your partner could open a Help to Buy: ISA and eventually receive a joint bonus of up to £6,000, which could go a long way to boosting your deposit. It's also worth remembering that the bonus won't be applied until you physically buy your first home (so you can't use the Government bonus for a sneaky holiday!). When the time comes, your solicitor or conveyancer will apply for the bonus, which will be added to the money you're putting towards your first home.

Am I eligible?

Generally speaking, most first-time buyers here in the UK will qualify to take part in the scheme, but just for the removal of doubt, here are a couple of checklists. To qualify for a Help to Buy ISA, you must:

  • Be 16 or over.
  • Have a valid National Insurance number.
  • Be a UK resident.
  • Be a genuine first-time buyer and not own a property anywhere else (either in the UK or abroad).
  • Not have another active cash ISA in the same tax year. If you've already got one, you can still open a Help to Buy ISA, but you'll have to take additional steps (find out more below).

Furthermore, to qualify for the Government bonus, the property you're buying must:

  • Be in the UK.
  • Cost no more than £250,000 (or up to £450,000 if you are buying in London ).
  • Not be a second home or a buy-to-let property.
  • Not be rented out after you buy it.
  • Be purchased with a mortgage.

You can use the Help to Buy: ISA together with other Help to Buy schemes, including the equity loan and mortgage guarantee elements, so it's perfectly possible to save for your home with Government support and go on from that to buy your property with the same kind of help.

What if I've already got a cash ISA?

If you haven't opened a new cash ISA, or put any money into an existing cash ISA in the current tax year, you can open a Help to Buy: ISA without restriction. However, if you've already saved into a cash ISA in the current tax year and now want to open a Help to Buy: ISA, you'll have to transfer your active cash ISA to the Help to Buy version.

You may not be able to go the whole hog, however: you can transfer up to £1,200 of your active cash ISA balance into your Help to Buy: ISA, but anything above this amount should be moved into either a stocks & shares ISA (you're allowed a stocks & shares ISA and a Help to Buy: ISA in the same tax year, subject to current tax guidelines and allowances) or a non-ISA savings account.

Alternatively, portfolio ISAs allow you to hold multiple ISA products within a cash ISA wrapper, but this is where it gets a bit complicated. You can still only have one active cash ISA (and one allowance) but it can be made up of one or more standard cash ISA products, including a Help to Buy: ISA.

Under a portfolio arrangement you can save into a cash ISA and a Help to Buy: ISA at the same time, subject to standard cash ISA and Help to Buy: ISA allowance limits. So far Nationwide and NatWest have announced that they'll offer this as an option, but it's worth speaking to them or your individual savings provider to get a better understanding of what it entails.

When can I get started?

Right now! The scheme officially launched on 1 December, and at the time of writing, several providers have revealed their Help to Buy: ISA products. You can see our Help to Buy: ISA information here.

What next?

Find out more by reading the official FAQs

Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

Related Articles

Inheriting ISAs – the new rules

Did you know that you can inherit your partner’s ISA savings? New rules came into being in April 2015 that mean ISA assets can be passed on to spouses or civil partners, and although it may not be a nice thought, it could make a huge difference.

2016-17 ISA Allowance Guide

Download your FREE Guide to ISA allowances for the 2015-16 tax year. Find out everything you need to know about saving or investing into an ISA.

ISA Fact Sheet

ISA, NISA, super ISA… with so many names floating around these days it can be difficult to know where to start, so we wanted to make things a bit easier for you.
 
 
Close