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Help to Buy: the ISA for first-time buyers

30 Nov 2015

2 minute read

With the housing market booming, many first-time buyers need a helping hand to get them onto the property ladder. The Government’s new Help to Buy ISA, which launched on 1 December 2015, aims to meet this need by offering first-time buyers unique incentives when saving for their first home.

The Help to Buy ISA enables first-time buyers to save up to £200 per month, with an opportunity to deposit an additional £1,000 when the account is first opened.

The Government will then provide a 25% bonus on the total amount saved, including interest, capped at a maximum of £3,000 on savings of £12,000, which is tax-free. The bonus can only be put towards a first home located in the UK with a purchase value of £250,000 or less, or up to £450,000 in London.

It is intended that opening a Help to Buy ISA will be as simple as opening a regular ISA, with interest rates set by the bank or building society an individual decides to save with. They will also be free to apply their normal ISA withdrawal and transfer rules, thus ensuring that savers can move between providers to get the best deal.

However, care needs to be taken as an individual may only subscribe to one Cash ISA per year, so an account holder cannot subscribe to a Help to Buy ISA and a Cash ISA in the same tax year. Additionally a first-time buyer can only have one Help to Buy ISA.

Savers will be able to apply for and open a Help to Buy ISA up to four years after the scheme is officially launched. Once an account is opened there is no limit on how long an individual can save into it and no time limit on when they can claim their bonus.

To get the most out of the Help to Buy ISA, individuals should:

  • Contribute the monthly maximum saving of £200
  • Deposit an additional £1,000 when opening the account
  • Remember that the account can remain open for as long as it takes to find a qualifying home.

Those saving with a partner to buy their first home together should ensure they both have a Help to Buy ISA, thus doubling both the amount they can save and the bonus available.

Note that savings from the Help to Buy ISA can only be used towards the purchase of a first home, so would not be available for buy-to-let properties. A scheme administrator will enforce this rule.

We can advise on a range of property taxation matters – please contact one of our Personal Tax Team for assistance.

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