Cash boost towards buying your first home
If you are a First-time buyer aged 16 or over, the Government will give you a cash boost towards buying your first home if you save into the new type of ISA.
The bonus will represent 25% of the amount saved so, for the maximum monthly saving of £200, the government will contribute £50, with a maximum government contribution of £3,000 on £12,000 of savings.
The bonus will be calculated and paid when you buy your first home.
For basic rate taxpayers, this will be equivalent to saving completely free of tax for their first home.
Accounts are limited to one per person rather than one per home so those buying together can both receive a bonus.
Overall design of the Help to Buy: ISA
The Help to Buy: ISA is designed to work with the grain of the existing ISA products and will be simple for savers to access and for savings providers to operate.
It is designed for people saving for their first home through a Help to Buy: ISA will be able to save up to £200 a month into their HTB ISA account.
The government will then top this amount up by 25%. So, for people who manage to save the maximum each month, the government will be topping up the account with £50 for every £200 saved.
The government bonus will be capped at a total of £3,000 on £12,000 of savings.
First time buyers will then receive the government bonus at the point they are ready to buy their first home. It can be put toward homes that are worth a maximum of £450,000 in London and £250,000 in all other areas of the UK.
Opening a Help to Buy: ISA
Opening a Help to Buy: ISA will, in most ways, be identical to opening a regular ISA under the existing cash ISA rules. A bank or building society will apply their normal account opening processes which include a minimum age of 16 years old and asking for a National Insurance Number.
However, there are some additional requirements for Help to Buy: ISAs.
In particular a Help to Buy: ISA:
- is only available for first time buyers; and
- each first time buyer can only open one Help to Buy: ISA during the lifetime of the scheme
Saving into a Help to Buy: ISA
Saving into a Help to Buy: ISA will also be very similar to saving into any other cash ISA account (for example, interest received on the account will be tax free).
There will, however, be some additional rules. The Help to Buy: ISA will have:
- a monthly maximum saving limit of £200.00
- an opportunity to deposit an additional £1,000 when the account is first opened no limit on how long the account can remain open
Under the new Help to Buy ISA scheme, you can save up to £200.00 every month and the government will add 25% on top (so £50.00 from HMRC on a £200.00 investment). You can also start it off with an initial lump sum of £1,000 which will be increased by £250.00 from HMRC.
The minimum you need to receive the bonus is £1,600 (so a £400 bonus), and the maximum the Government will contribute is £3,000 (so that means you will have saved £12,000 over a five year period ).
The bonus will be available on home purchases of up to £450,000 in London and up to £250,000 outside of London and will be paid when the house is purchased.