Understanding the Help to Buy ISA: Saving for your first home

Woman smiling while talking on the phone about her Help to Buy ISA

Savings

MoneyPlus Features Team

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.

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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.

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