What is the Help to Buy ISA?
A Help to Buy ISA is a savings account for first time buyers which aims to help you save money towards your first home. It was introduced by the UK government in December 2015, but alas, it’s no longer open to new applications.
However, if you already have a Help to Buy ISA, you can keep paying into the account until November 2029 – a Guy Fawkes Night to savour.
When did the Help to Buy ISA end?
Applications for the Help to Buy ISA closed on 30th November 2019. So if you’re wondering how to open a Help to Buy ISA, only a time-travelling Time Lord can help you now.
How Help to Buy ISAs work
If you still have a Help to Buy ISA, here’s a whistle-stop tour of how it works:
- You can pay in a maximum of £200 a month to your Help to Buy ISA.
- For every £200 you save, the government contributes £50 – a 25% top-up – which is referred to as the government ‘bonus’.
- But before you crack open the bubbly, you can only save up to £12,000 in a Help to Buy ISA.
- Additionally, the maximum amount you can earn from the government bonus is £3,000.
- You need to save a minimum of £1,600 before you can qualify for a government bonus.
Who is the Help to Buy ISA for?
While it’s no longer open to applications, the Help to Buy ISA is for first-time buyers based in the UK aged 16 or over. The property you purchase can be worth no more than £250,000 (or £400,000 in London) and it will need to be your only home. It can’t be used for overseas properties, so unfortunately you’ll have to stop using ‘Costa del Sol’ as a Rightmove search term.
Help to Buy ISAs are offered on an individual basis, meaning that you and a partner could have separate Help to Buy ISAs and double the potential bonus.
According to treasury stats from 2021, more than 410,000 homes have been purchased with the support of the Help to Buy ISA. The average age of a first-time buyer using the scheme is 28, meaning they’ll scarcely remember Victoria Beckham’s collaboration with Dane Bowers.
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What replaced the Help to Buy ISA?
The Help to Buy ISA might be gone, but just like the Fast & Furious films, can we definitely expect another one soon? Well, sort of.
While there’s no like-for-like replacement for the Help to Buy ISA, you could consider a Lifetime ISA as an alternative. If you’re aged between 18-39, you can use a Lifetime ISA (sometimes called a LISA) to save towards buying a first home, or indeed retirement.
You can save up to £4,000 per tax year into your LISA until you’re 50, and it offers a 25% bonus of up to £1,000 a year. You can hold cash or stocks and shares (or a combination) in your LISA, but a reminder – the value of stocks and shares can fluctuate over time.
For more info, GOV.UK has the lowdown on Lifetime ISAs.
How to claim the Help to Buy ISA bonus
Your Help to Buy ISA government bonus is paid on completion; interestingly, the Lifetime ISA pays a monthly bonus.
If you have a Help to Buy ISA and you’re buying your first home, you should instruct your solicitor to apply for the bonus after you’ve had an offer accepted on a property. They’ll need time in order to make the application and ensure the funds can be added to your transaction between the exchange and completion dates. So once you’ve had an offer accepted, it’s a case of ‘get your skates on’.
Note that any Help to Buy ISA bonuses must be claimed by 1st December 2030.
Can you use the Help to Buy ISA for a deposit?
Yes and no. You can’t use the Help to Buy ISA bonus towards your initial deposit (as you’ll only receive it on completion). However, that’s not to be confused with your Help to Buy ISA savings, which you can put towards the deposit on exchange day.
How to close a Help to Buy ISA
You can close your Help to Buy ISA by contacting your bank or building society. You can do this at any time, but you may want to get the ball rolling towards the end of your home purchase. If for whatever reason the purchase falls through, you can reopen the account by getting a ‘purchase failure notification’ from your solicitor and giving this to your bank. After closing an account, you’ll have 12 months to claim your government bonus.