Since it was introduced in 2015, the Help to Buy ISA has been utilised by many first-time buyers. However, time is running out for those who wish to make the most of this initiative as it is only available to new applicants until 30 November 2019.
How does it work?
A Help to Buy ISA allows maximum contributions of £2,400 a year and can be used to purchase a property up to the value of £250,000 (£450,000 in London),
Like all ISA products, savings are tax free, however a Help to Buy ISA provides an additional government bonus of 25% when purchasing your first home, so, for every £200 you save, you receive a government bonus of £50.
The minimum government bonus is £400, meaning that you need to have saved at least £1,600 into your Help to Buy ISA before you can claim your bonus. The maximum government bonus you can receive is £3,000 – to receive this you will need to have saved £12,000.
Those who have already or plan to, open their Help to Buy ISA before the closing date, will be able to continue to contribute to their ISA’s. Accounts close to new contributions on the 30 November 2029 with all bonuses needing to have been claimed by 1 December 2030.
For further information, visit The Money Advice Service.
An alternative: Lifetime ISAs (LISA)
If you are unable to open a Help to Buy ISA before the deadline on 30 November 2019, or if you want to make increased contributions, the Lifetime ISA (LISA) may be a suitable alternative.
To qualify for a LISA, you must be aged between 18 and 39 and a UK resident, or Crown servant. You can contribute into a LISA until age 50.
A LISA allows maximum contributions of £4,000 a year and can be used to purchase properties up to the value of £450,000 anywhere in the UK.
In addition to your contributions, the government will provide a bonus of 25%, up to the maximum of £1000 a year. The rules specify that to purchase a home using a LISA, the account must be open for at least a year.
An added benefit
LISAs can also be used to save for retirement and can be partially or fully withdrawn once you turn 60 without the need to pay a fee. Funds can be withdrawn from a LISA if you are diagnosed with a terminal illness (with an expected life expectancy of less than 12 months). Withdrawals made for any other purpose may be subject to a charge of 25%.
For more information download our LISA factsheet.
This document is solely for information purposes and nothing in it is intended to constitute advice or a recommendation. You should not make any investment decisions based on its content. The value of investments can fall as well as rise and you may not get back the amount you originally invested. ISA eligibility also depends upon individual circumstances.
While considerable care has been taken to ensure the information contained in this article is accurate and up-to-date, no warranty is given as to the accuracy or completeness of any information.