28th September 2015 at 2:50pm
If you’re a first-time buyer wanting to buy your own place – or plan to give money to help your children or grandchildren do so – the news that the Help to Buy ISA is launching on 1 December 2015 will be very welcome.
The Help to Buy ISA, unveiled by the government earlier this year, aims to help people get their feet on the property ladder at a time when many find it a struggle due to high property costs, fees and big deposits. Many young would-be buyers worry that owning a home is beyond their reach and they’ll be stuck flat sharing into their 40s.
The good news is the Help to Buy ISA is a new way to take the sting out of some of the costs of buying. Here’s what you need to know about how they will work:
- Help to Buy ISAs are a type of Cash ISA and will be available from banks and building societies from 1 December 2015
- You can have both, but actually only pay into one at any time
- If you already pay into a Cash ISA, you’ll need to wait until the next tax year in April to open a Help to Buy ISA
- There is no minimum monthly level of savings – although providers can choose to impose one. You can save a maximum of £200 a month
- Save the maximum of £12,000 into a Help to Buy ISA and a government bonus will boost your total savings to £15,000 – that’s a 25% boost for your savings and a £50 bonus for every £200 you save. That’s on top of the tax-free interest you earn on those savings at the rate paid by your building society or bank
- The minimum bonus available is £400 per person on savings of £3,000; the maximum is £3,000 per person on the full £12,000
- Any bonus is only paid when you use your savings to buy your first home at up to £450,000 in London and £250,000 outside London, as long as you’re over 16
- These new ISAs will be available for 4 years, but once you have opened an account there’s no limit on how you long you can save for
- You can take your money out to buy a property when you need to – it’s not locked away
- Help to Buy ISAs are per person rather than one per home – so those buying together can both get a bonus as long as they’re first-time buyers
- Interest earned on all types of ISA are free of tax.
The Help to Buy ISA graphic here shows more.
The information in this blog or any response to comments should not be regarded as financial advice.
The information here is based on our understanding in September 2015.