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What is a Help to Buy ISA?

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Written by Dom James, Financial Content Writer

17 April 2020

The Help to Buy ISA scheme ended on 30th November 2019. You will no longer be able to open a Help to Buy ISA, but If you already have a Help to Buy ISA you will still get the 25% bonus when you withdraw the money to buy your first property.

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.

The Help to Buy ISA scheme ended on 30th November 2019. You will no longer be able to open a Help to Buy ISA, but If you already have a Help to Buy ISA you will still get the 25% bonus when you withdraw the money to buy your first property.

You could only get a Help to Buy ISA if you were a first time buyer.

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.

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 and receive a 25% bonus (up to £1,000 a year). If the funds are not used for a house purchase or retirement, you will lose the bonus.

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

  • Rent to buy

  • Shared ownership

  • Help to Buy Equity Loan

Did you qualify for a Help to Buy ISA?

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

  • 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.

See the GOV.uk overview of the Help to Buy ISA's features

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

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

If you always paid in the maximum amount every month, you would 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 could not exceed the maximum amount (£1,200).

How much bonus could you get?

The maximum bonus on a Help to Buy ISA was £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
£2,000£500£2,500
£4,000£1,000£5,000
£6,000£1,500£7,500
£8,000£2,000£10,000
£10,000£2,500£12,500
£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 if you already have an account with them.

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 is an ISA?

FAQs

Not initially. The Help to Buy ISA is only available to people looking to buy a property they will live in. However, if your circumstances change, you may be able to let the property out.

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

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