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5 things you need to know about the Help to Buy ISA

5 things you need to know about the Help to Buy ISA

5 things you need to know about the Help to Buy ISA

The government’s Help to Buy ISA has been launched today (December 1), and it’s expected to be a valuable tool in getting first time buyers onto the property ladder.

It’s a tax-free product, meaning any interest you earn won't be taxed. In addition to this, the government will top up your contributions by 25% to a maximum of £3,000.

Here’s a rundown of what the Help to Buy ISA is and how it could help you move into your first home.

1.    Anyone can open an account

Help to Buy ISAs are available to anyone over the age of 16, providing you plan on owning your own property sometime in the future. You must also never have owned residential property in the past and intend to live in the home – not rent it out – once you’ve bought it.

The home you buy must be valued at less than £250,000, or £450,000 if you’re in London.

2.    The government will top up your contributions

For every £200 you put into your Help to Buy ISA, the government will give you an extra £50. The most you can receive from the government is £3,000, which is a significant amount when you’re saving for your first home.

The maximum monthly contribution is £200, but during the first month your account is open, you can add £1,200. The most you can save in your Help to Buy ISA is £12,000.

3.    Couples save separately

You can only take out a Help to Buy ISA as an individual, so if you’re saving up for a new home with a friend or partner, you can both have your own account. 

This means you can each save up to £12,000 tax-free – so that’s a joint total of £30,000 towards your new home once the government has added its 25% bonus.

4.    You can only have one ISA

Bear in mind that if you decide to take out a Help to Buy ISA, you won’t be able to sign up for any other ISA products, including cash accounts.If you’ve had a cash ISA in the past, but not in the current financial year, then you're free to open a Help to Buy ISA.

If you hope to buy a home of your own, this new product could be the most effective way of building your savings. You can only have one Help to Buy ISA.

5.    There’s no rush to save

Help to Buy ISAs will be available until December 2019. You will receive a bonus on your Help to Buy ISA until December 2030, so there’s no time constraint providing funding isn’t withdrawn by a future government.

When you’re in a position to buy a new home, your solicitor or conveyancer will apply for your government bonus on your behalf. You won’t receive the money directly into your account. If you decide not to buy your own home, you can withdraw the cash minus the government bonus.

Strata’s sales director Gemma Smith said: “The launch of the Help to Buy ISA and the Starter Homes Initiative look set to help more people get onto the property ladder. Strata is keen to look at schemes that assist first time buyers and it will be interesting to see what impact these initiatives have on the market.”

 

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