What is a Help to Buy ISA?

A Help to Buy ISA is a type of tax free individual saving account. The government pays you a 25% bonus on your total savings when you withdraw the money to buy your first property.

You'll receive the bonus when you complete on a property. This means the money cannot be put towards your deposit.

The maximum bonus is 3,000. To get the maximum bonus amount, you'd need to save 12,000.

You can only get a Help to Buy ISA if you're a first time buyer.

Help to Buy ISAs are currently available from banks and building societies across the UK. The scheme ends on 30th November 2019. You will not be able to open a new one after this date, but you can continue saving into your account if it's already open.

Help to Buy ISAs can either be a cash or a stocks and shares ISA. Investment ISAs put your capital at risk, and you may get back less than you originally invested.

You must claim your bonus by 1st December 2030, otherwise you'll lose it.

Do you qualify for a Help to Buy ISA?

To be eligible for a Help to Buy ISA, you must be:

  • Over 16 years old

  • A first time buyer

You do not qualify as a first time buyer if you've previously owned or inherited a property.

How much can you pay into a Help to Buy ISA?

You can pay in up to 1,200 in the first month of opening the account. After that, you can pay in a maximum of 200 every month until you buy your first property.

If you always pay in the maximum amount every month, you'll save 3,400 in your first year, and 2,400 every year after that.

When transferring cash from an existing cash ISA into a Help to Buy ISA, you cannot exceed the maximum amount (1,200).

How much bonus can you get?

The maximum bonus on a Help to Buy ISA is 3,000 per person. To get this, you'd need to save 12,000. Even if you saved more than that, you would not get a bigger bonus.

The minimum bonus amount is 400. For this, you'd need to save 1,600.

Help to Buy savingsGovernment bonusTotal towards mortgage
1,600*400 2,000
2,0005002,500
4,0001,0005,000
6,0001,5007,500
8,0002,00010,000
10,0002,50012,500
12,000**3,000 15,000
* Minimum savings balance required to qualify for any bonus.
** Maximum savings balance to qualify for the highest amount of bonus.

Can you use your bonus to buy a property anywhere?

The bonus is only payable if you're buying a property in the UK worth up to 250,000 outside of London, or up to 450,000 within London.

Who gets the Help to Buy ISA bonus?

The ISA account holder gets the bonus when they complete on a property. It's processed by the buyer's solicitor, which could cost up to 50, plus VAT.

If you and your partner are buying a property together, you could earn a total bonus of 6,000. To get this, you must both be first time buyers and have each saved 12,000.

Will you get the bonus if you do not buy a property?

You will not get the bonus if you decide to close the account or use the funds for another purpose.

How do I get the bonus paid?

To get the bonus:

  1. Contact your bank or building society and ask for a closing letter. It confirms your balance and the bonus you qualify for

  2. Withdraw the money from your Help to Buy ISA along with the closing letter

  3. Give the closing letter to your solicitor or conveyancer

  4. Your solicitor will process your bonus for you

You will not see the bonus added to your savings account. Instead it will be paid towards your mortgage when you complete on your property purchase.

What if you buy with someone who is not a first time buyer?

As long as your name is on the title deeds to the property, you'll qualify for the government bonus. Your partner will not qualify for the bonus.

Do you earn interest with a Help to buy ISA?

Yes, every bank and building society pays interest on each of their Help to Buy ISAs. Different providers offer different rates.

Some providers offer a better rate is you already have an account with them.

Make sure you compare rates from as many providers as possible to get the best account.

Does a Help to Buy ISA use up your annual ISA allowance?

Yes, normal ISA rules and limits apply to Help to Buy ISAs.

The annual ISA allowance is 20,000. You can only open 1 cash ISA per year, but you can pay money into multiple cash ISAs at the same time. You cannot exceed the 20,000 limit per year.

Not all providers let you save into multiple ISAs. Those that do include:

  • Aldermore

  • Nationwide Building Society

  • NatWest

  • Newcastle Building Society

What happens if your property purchase does not go through?

You can re-open your Help to Buy ISA after your solicitor gives you a purchase failure notification letter.

This notification lets you reinvest your ISA back into a Help to Buy ISA, including the bonus you had already built up.

Or, you can reinvest the money into a normal ISA without it affecting your ISA allowance, but you would lose the bonus.

How do you apply for a Help to Buy ISA?

To apply for a Help to Buy ISA, you'll need:

  • Your personal details, including your name, address and date of birth

  • Your National Insurance number

  • A minimum of 1 to open the account

You have to sign a first time buyer declaration. This confirms that you will use your savings towards the purchase of your first property. It also states that if you use the savings for any other purpose, you will not qualify for the bonus.

Q

Can you use a Help to Buy ISA for a property you want to rent out?

A

No, the Help to Buy ISA is only available to people looking to buy a property they will live in.

Q

Do you need to prove you are saving for a house?

A

No. You can use the Help to Buy ISA to save money for any cause, you just will not get the 25% bonus.

What are the alternatives to the Help to Buy ISA?

The Lifetime ISA is another type of cash ISA aimed at those wanting to buy a property or save for retirement.

You can pay in up to 4,000 a year. If the funds are used for a house purchase, you will qualify for a 25% bonus (up to 1,000 a year) from the government.

It's not the only alternative government scheme available for first time buyers. Others include: