Help To Buy: ISA – your questions answered

29th January 2016

With many Britons struggling to get on to the property ladder, the government’s Help to Buy: ISA designed specifically for first-time buyers.

The scheme provides hope for would-be homeowners, however, many people have questions about the specifics, so here we have answers for some frequently asked questions.

Q: How do I qualify?

A: The Help to Buy: ISA is available to any UK resident, aged 16 or over, who has a valid National Insurance number and is a first time buyer that does not own a property anywhere else in the world.

Q: How do I start saving?

A: The Help to Buy: ISA is available from most major banks and building societies until November 30, 2019. After that date they won’t be available to new savers.

Q: How much can I save?

A: Savers are able to open accounts with an initial deposit of up to £1,000, and thereafter will be able to save up to £200 a month towards their first home in a tax-efficient manner.

Q: Is there a limit on how long I can save for?

A: No, there is no limit on how long account holders can save for, but you must have opened your Help to Buy: ISA before November 30, 2019.

Q: How much will the government put in?

A: First-time buyers who choose to save through a Help to Buy: ISA will receive a tax-free government bonus worth 25% of the amount saved (including interest). So, for every £200 saved, the government will contribute £50.

Q: Will the government contribution be unlimited?

A: No. The government contribution will be capped at an overall maximum of £3,000 (i.e. on £12,000 of savings) and subject to a minimum amount of £400. This means savers must save at least £1,600 to receive any bonus.

Q: When will I receive the government’s contribution?

A: The scheme is designed to ensure that the government bonus is used as intended. Consequently the bonus will only be paid at the point a first home is purchased.

Q: Will the value of the house I’m buying make any difference?

A: Yes. The government bonus can only be put towards first homes costing up to a certain threshold (£450,000 in London and £250,000 in other parts of the UK).

Q: Can buy-to-let investors take advantage?

A: No. The Help to Buy: ISA can only be used for property that will be the first-time buyer’s main residence. The government bonus will not be paid on buy-to-let property.

Q: If I’m buying with someone else, can we both take out an ISA?

A: Yes. The Help to Buy: ISA is available to all first-time buyers aged 16 and over, regardless of whether they are buying a property on their own or with another person. This means that two first-time buyers buying together would each be eligible for a government bonus.

Q: Can I have other ISAs at the same time?

A: It is possible to contribute into a Help to Buy: ISA and another cash ISA in the same tax year. If you have paid into a cash ISA this tax year and want to open a Help to Buy ISA before April 6, 2016, you will have to transfer up to £1,200 of your current cash ISA balance into your Help to Buy: ISA. Anything more than this should be moved into either a stocks and shares ISA or a non-ISA account, but there will be tax penalties.

Q: When should I start saving?

A: Now! First-time buyers who would like to take advantage of the scheme are advised to start saving as soon as possible so they can make the maximum initial contribution of £1,000 – thereby immediately securing a bonus of £250!