Is it worth taking out a Help-to-Buy ISA before they close on 30 Nov?

Posted by Mark Lloyd, Property Mastery Academy on 20 May 2019 | Comments

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The Government's Help to Buy ISA scheme is a savings account designed to help first-time buyers get on the property ladder.

help to buy isa

The scheme is set to end on 30 November 2019, so if you want to take advantage of it, you’ll need to act soon. If you open a Help to Buy ISA before this date, you can save into the account until 30 November 2029, when the account will be closed to additional contributions.

How does the scheme work?

The scheme allows you to save up to £200 a month into the account. Interest on the account is tax-free, and when you have saved enough to buy a property, the Government top up your savings with a bonus of 25% that is also tax-free. However, the maximum bonus available is £3,000, which would be available on savings of £12,000.

The Help to Buy ISA is only available as a cash ISA not with stocks and shares. You can transfer in from an existing ISA if the balance you’re moving is £1,200 or less. This is the maximum amount you can open the ISA with.

How is the bonus paid?

Your solicitor or property conveyancer will need to apply for the bonus on your behalf. The Government pays the bonus to your solicitor just before completion. Your solicitor or conveyancer will probably charge around £50 (+VAT) to make the bonus application.

The funds from your ISA can be used as a deposit, plus any tax-free interest, which will be paid on exchange of contracts. The Government’s bonus will come through on completion.

The benefits of Help to Buy ISAs

The account is tax-free as is the Government's 25% bonus, making this one of the top savings rates you’ll find on the market.

You can keep saving up to £200 a month until November 2029. You will need to claim your bonus from the Government by 1 December 2030. You can only hold one Help to Buy ISA per person. If you’re buying as a couple, you can achieve a bonus of £6,000.

You can take your cash out of the account when you like, but you only get the bonus when you use the ISA to purchase a property in the UK. If you want to switch to a different ISA to gain a better rate you can, just ensure you do an official ISA transfer to keep your tax-free status.

Be aware of the following rules

The maximum contribution you can make each month is £200 a month. By saving this amount each month, it will take 4.5 years to be able to claim the maximum Government bonus of £3,000.

You need a balance of at least £1,600 to qualify for the 25% bonus – on this amount the bonus would be £400.

Help to Buy ISAs are only for first-time buyers, so you can only open an account if you’ve never owned a home.

There is a price cap on the property you can buy with a Help to Buy ISA – it must cost less than £250,000 outside London or under £450,000 in London and be purchased with a mortgage.

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