What is the Help to Buy ISA ?
The help to buy ISA was introduced on December 1st 2005 and will end on November 30th 2019. No new accounts can be opened after this date. For accounts opened before this date, subscriptions and bonus claims can still be made up to December 1st 2030.
The aim of this product was to help people save money for purchasing their first home.
Who is eligible to open a Help to Buy ISA ?
This is perhaps not particularly relevant given the scheme is due to close in November 2019, but for those still interested in opening an account in the time left, the following criteria will need to be met:
Investor will need to be at least 16 years old
Have a valid National insurance number
Be a first time house buyer, i.e., does not own a property, nor has ever purchased one.
Be a UK resident
Not having subscribed to another Cash ISA in the same tax year.
Subscriptions and Bonus
You are allowed to save £ 200.00 a month in a Help to buy ISA, with an additional £ 1,000.00 subscription being allowed within the first month of opening your account.
The bonus paid will be 25% of the subscriptions paid in plus interest, subject to a minimum of £ 400.00 and a maximum of £ 3,000.00. This means that you’ll need to have saved a minimum of £ 1,600.00 in order to receive the minimum bonus of £ 400.00 and subscriptions over £ 12,000.00 will not receive the 25 % bonus.
When is the Bonus paid ?
Unlike the LISA (Lifetime ISA) bonus, which is paid monthly, the Help to buy ISA bonus is paid by HMRC only when you are buying your first home.
Your conveyancer or solicitor will claim the bonus on your behalf and the funds will be used at the completion of the house purchase: the bonus cannot be used for the deposit at exchange of contracts, or any fees related to the house purchase.
Purchase Price
The Help to buy ISA bonus can only be used for first time buyers purchasing a property with a purchase price up to £ 250,000.00 outside of London and £ 450,000.00 if the property is in London. The buyer must be intending to live in the property. The bonus can also be claimed on self-build properties. See below table of London boroughs for the £ 450,000.00 price cap applies.
Buying a Property with a Spouse/Partner
As long as you are a first time buying, then you can still claim your Help to buy bonus even if your partner has previously owned a home.
It is also the case that two first time buyers purchasing a property together, can both have a Help to buy ISA and both claim the government bonus.
What if the Property Purchase falls Through ?
If the property purchase falls through, then your conveyancer or solicitor will provide you with a “Purchase failure notification”, which should be presented to your Help to buy ISA provider, whom will reopen the account and allow you to re-deposit the withdrawn savings. The conveyancer/solicitor will return the bonus to the provider, whom in turn will return those funds to HMRC.
It should be noted that your can only own one Help to buy ISA at anytime. This is different to Cash and Stocks and Shares ISA’s, for which a new one can be opened every year (though you can only subscribe to one in the same tax year).
Help to buy ISA’s can be transferred into a LISA (Lifetime ISA), which has effectively replaced the Help to buy ISA, in that the LISA bonus can be used for purchasing your first home, or for your retirement. The LISA bonus is not subject to the £ 3,000.00 limit, nor £ 400.00 minimum.