Leanne Macardle

Leanne Macardle

Editor
Published: 06/12/2018

At a glance

  • Help to Buy ISA is a Government scheme to help first-time buyers save towards their first home.
  • Different banks and building societies offer Help to Buy ISAs.
  • By saving in a Help to Buy ISA you can receive a Government bonus of 25% to a maximum of £3,000.
  • You will need to save a minimum of £1,600 to qualify for the bonus.
  • Accounts are open to individual first-time buyers, meaning a couple who are both buying their first home together can double up and have an account each.

 

The Help to Buy ISA has been around for some time, but there's always someone discovering it for the first time, and today could be your lucky day. So 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 in 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.

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 for the scheme, but just to remove all 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 the Help to Buy Equity Loan scheme, 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.

Note that the Help to Buy ISA scheme is set to close on 30 November 2019 (you can still claim the bonus on an already opened account until 2030), so while the Government could extend, you won’t want to wait too long if you’re interested in one of these accounts.

What if I already have 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, as you can only transfer up to £1,200 of your active cash ISA balance into your Help to Buy ISA. 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. To see if the provider you’re interested in offers such a portfolio, simply go to the Help to Buy ISA page and check if it allows you to split your ISA allowance in the details. That said, it's also worth speaking to the individual savings provider to get a better understanding of what this entails.

Moneyfacts tip

Moneyfacts tip Leanne Macardle

Since the Lifetime ISA was introduced in 2017, savers now have two options to save for their first home with the help of a Government bonus. To help you decide which is more suitable, we’ve written a guide comparing the two side-by-side.

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.

colourful buildings

At a glance

  • Help to Buy ISA is a Government scheme to help first-time buyers save towards their first home.
  • Different banks and building societies offer Help to Buy ISAs.
  • By saving in a Help to Buy ISA you can receive a Government bonus of 25% to a maximum of £3,000.
  • You will need to save a minimum of £1,600 to qualify for the bonus.
  • Accounts are open to individual first-time buyers, meaning a couple who are both buying their first home together can double up and have an account each.

 

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