Help to Buy ISA

Last updated: 19th February 2018

Help to Buy ISA for first time buyers

With a Help to Buy ISA, the government contributes an additional 25% bonus to your total savings when you buy your first home, up to a maximum bonus of £3,000.

Help to Buy ISAs are also known as first time buyer ISAs and Save to Buy ISAs. These terms all mean the same thing.

Are Help to Buy ISAs still available?

Yes. You can open a new Help to Buy ISA up until 2019. After that, you won't be able to open a new one, but you can manage and benefit from an already open Help to Buy ISA.

What's the maximum bonus?

The maximum bonus is £3,000. You need to save £12,000 to get this much.

You don't earn interest on the bonus, because it's added when you buy your property. But you do earn interest on what you save in the Help to Buy ISA.

You can save more than £12,000 in your Help to Buy ISA, but the maximum bonus is £3,000.

Can I open a Help to Buy ISA and a Cash ISA in the same tax year?

You can, but they would both contribute to your annual ISA allowance, which is currently £20,000.

You can split your ISA allowance across the different types of ISA. These are:

For example, if you put £12,000 in your Help to Buy ISA, you'd only have £8,000 left over for a Cash ISA.

The Personal Savings Allowance means that all savings accounts earn a certain amount of tax-free interest. If you're a standard-rate taxpayer, you can earn up to £1,000 tax-free interest with any savings account.

So unless you have enough money to save that you'd earn £1,000 in interest payments after 1 year, a Cash ISA might not be the best option for you.

Are Help to Buy ISAs only available on new builds?

No. You can use your Help to Buy ISA for any type of property.

People get confused with this because they're mixing up the Help to Buy ISA with the Help to Buy Equity Loan, which is a government scheme that helps you buy a property with a lower deposit. That scheme is only available for new builds.

Are help to buy ISAs available in Scotland?

Yes. Help to Buy ISAs are available throughout the UK, including Scotland and Northern Ireland.

Can a Help to Buy ISA be used for a deposit?

The Help to Buy ISA bonus can only be used towards a mortgage deposit, but there's been some confusion over what that means.

You pay two deposits when you buy a property: an exchange deposit and a mortgage deposit.

The exchange deposit confirms the purchase and gets the property off the market. It's paid to the seller, and it's usually about 10% of the purchase price.

You can't use the Help to Buy ISA bonus to pay the exchange deposit.

The mortgage deposit is the bit of the purchase price that isn't covered by your mortgage. This is what the Help to Buy ISA bonus goes towards.

Can the Help to Buy ISA be used on Shared Ownership?

Yes. The Help to Buy ISA can be used with the Shared Ownership scheme.

But bear in mind that the Help to Buy ISA has a maximum property price restriction of £250,000 outside London. With Shared Ownership, this means the full property price, not the price of the share.

So if you buy 50% of a £400,000 house, you won't be able to get your Help to Buy ISA bonus, even though the share you're buying only costs £200,000.

Can the Help to Buy ISA bonus be used for stamp duty?

No. You can't use the Help to Buy ISA to pay stamp duty on your new home. This is because the bonus is paid directly to your mortgage lender, whereas stamp duty is paid to the government.

Since the 2017 Autumn Statement, first time buyers don't pay stamp duty on property purchases of less than £300,000. And because the Help to Buy ISA is only available if you're paying £250,000 or less for your property, in most cases stamp duty won't be an issue.

Can you use a Help to Buy ISA with a Help to Buy Equity Loan?

Yes. The Help to Buy ISA bonus works in conjunction with the major government first time buyer schemes, including the Help to Buy Equity Loan and Shared Ownership.

Can my parents fund my Help to Buy ISA?

Yes, your parents could transfer money to your Help to Buy ISA. But you can only put a maximum of £200 per month in a Help to Buy ISA, with a maximum initial deposit of £1,000.

Do I qualify for the Help to Buy ISA?

To qualify for the Help to Buy ISA, you need to:

  • Be a first time buyer
  • Buy a property worth £250,000 or less, or £450,000 or less if you're buying in London

A first time buyer is anyone who's never owned a property before.

If you're a first time buyer buying with someone who isn't a first time buyer, you still qualify for the Help to Buy ISA bonus.

Does my Help to Buy ISA count towards my overall ISA allowance?

Yes, the money you save in your Help to Buy ISA counts towards your ISA allowance. But the bonus you receive from the government when you buy your home doesn't. That's paid directly to your mortgage lender by the government. It's never paid into your account.

How many Help to Buy ISAs can I have?

You can have 1 Help to Buy ISA per person. If you're buying with other first time buyers, each of you can have your own Help to Buy ISA.

 

This guide is intended as a summary only and does not constitute legal or financial advice given by Leeds Building Society. No reliance should be placed on this guide and you must make your own decisions. We recommend that you seek independent legal and/or financial advice if you have any questions or queries.