Help-to-Buy ISA scheme: What you need to know

The Help to Buy ISA gives first-time buyers a welcome leg-up in the housing market. Jackie Bate explains the ins and outs of the new scheme.

From December 1 2015 to November 30 2019, first time buyers can take advantage of the government’s Help to Buy ISA scheme for properties costing up to £250,000, or £450,000 in London.

The scheme enables you to save up to £1,200 in the first month and £200 a month after that.

How the scheme works in practice

When you come to buy your first home and use the ISA towards the deposit, the government will add a 25% bonus on the amount saved, from a minimum of £300 on savings of £1,600 to a maximum of £3,000 if you have £12,000 put by.

It is worth keeping in mind that all bonuses on a Help to Buy ISA must be claimed by December 1 2030, and that this should be done as part of the work your solicitor carries out when you buy your home.

Who qualifies and who doesn’t?

All first time buyers aged 16 or over qualify for the scheme. However, you will not if two people are buying together and one already owns a property.

It is also important to know that you are only allowed one Help to Buy ISA, unlike cash ISAs that can be opened as new investments each tax year.

Even so, you do have the freedom to transfer the Help to Buy ISA to another provider if the interest rate with your current one drops. And, as with other ISAs, the interest earned on your savings is tax free.

Another point to note is that you cannot open both a cash ISA and a Help to Buy ISA in the same tax year, although a cash ISA from previous years does not stop you opening a Help to Buy ISA.

What happens if you don’t use the ISA to buy a house, or if you take cash out

If you don’t use the funds saved in the Help to Buy ISA to purchase a home, that’s fine. You just can’t claim the government bonus that would otherwise have been yours. You will still be entitled to the interest earned on what you have saved, though.

As with cash ISAs you can make partial withdrawals from a Help to Buy ISA. The only difference is that you won’t be eligible for the bonus on the amount withdrawn.

What to do next

For more information, visit the Help to Buy website or call your financial adviser. We can also put you in touch with professionals who can advise you and lenders offering the best interest rates.

For further assistance on Help to Buy ISAs, or any other Home and Family matter, call Jackie on 01772 25832.