Help To Buy – A welcome addition to the ISA Range
December 30, 2015
Help to Buy Individual Saving Accounts (ISAs) have been described by TV finance presenter, Martin Lewis, as a ‘no
brainer’, providing savers with both interest on their savings and government-backed bonuses designed to help
first-time buyers save for a mortgage deposit.
With house prices continuing to rise year on year, many find saving for a deposit a real challenge. No wonder then, that the launch of the Help to Buy ISA was greeted with such enthusiasm when it joined the ISA range on 1 December 2015.
A Help to Buy ISA is available to those aged 16 and over, resident in the UK with a valid National Insurance number, who are prospective first-time buyers. Savers can make an initial deposit of up to £1,000 when the account is first opened. As an extra incentive to save, the government will boost your savings by 25%; representing a bonus of £50 for every £200 you save.
The maximum monthly contribution is £200, there is no minimum monthly saving amount, however there is a minimum bonus of £400, so you would need to have at least £1,600 in the account to qualify for the bonus.
The maximum contribution from the government will be £3,000 per ISA account. Couples purchasing a property together can each take out a Help to Buy ISA and they will each be able to secure a total of £6,000 in bonuses. Together, their maximum savings of £24,000 will be boosted to £30,000. Interest is paid on savings, and, as with other types of cash ISA, is tax-free.
The 25% bonus from the government is payable when savers put a deposit on their first home. At that point, the Help to Buy ISA is closed and the bonus can be claimed from the government by the solicitor or conveyancer acting for your house purchase. When you take out your mortgage, it doesn’t have to be with the bank or building society where the Help to Buy ISA was held.
The maximum price of a property eligible under the scheme is £450,000 in inner and outer London boroughs and £250,000 outside London.
ISAs and Help to Buy ISAs
With a Help to Buy ISA, after the initial deposit, the maximum monthly contribution is £200, which is considerably less than ordinary ISAs, where for tax year 2015-16 the allowance is £15,240.
You are unable to hold both a cash ISA and a Help to Buy ISA in the same tax year. However there are ways of transferring money between ISA accounts so that you can take advantage of the government’s Help to Buy ISA bonus. Your financial adviser will be able to recommend the best choice of account for your savings.