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If you are considering stepping onto the property ladder now is time to consider putting your savings in a Help to Buy ISA with the deadline date being only a matter of months away!

After 30th November 2019, you will not be entitled to open a Help to Buy ISA account. If you open the account before that date you can keep saving into the account so long as the bonus is claimed by 1st December 2030.

A Help to Buy ISA is boosted with government funding who provide a bonus of 25%, which is a considerable contribution towards your deposit and gets you one step closer to purchasing your first home.

Can I get a Help to Buy ISA?

The rules of a Help to Buy ISA are as follows-

  1. You must be a first-time buyer and not own any part of a property elsewhere in the world.
  2. You must be aged 16 years and older.
  3. You are required to save at least £1,600 in the ISA before you can claim the minimum £400 bonus.
  4. The maximum bonus you can receive is £3,000.
  5. Most Help to Buy ISA providers do not allow you to open a Help to Buy ISA and a normal Cash ISA in the same tax year.
  6. If you are buying a property with your partner, for example, you could both have Help to Buy ISAs meaning double the savings!
  7. The property purchase price must be under £250,000.
  8. You must live in the property after the purchase and you cannot rent out the property.
  9. It cannot be used towards the purchase of an overseas property.
  10. You are not permitted to have more than one Help to Buy ISA.
  11. Once your savings reach £1,600, you are entitled to claim the bonus.

Most banks and building societies offer Help to Buy ISAs and as with most accounts, you should research the interest rates offered. You are entitled to switch providers at any time however should ensure that you do not withdraw any funds during the switch process as this will result in you not being entitled to the government bonus.

What happens after the 30th November?

From 1st December 2019 Help to Buy ISAs will be replaced with Lifetime ISAs and have the following rules-

  1. You are entitled to open a Lifetime ISA is you are aged between 18 and 39.
  2. You must be a resident in the United Kingdom.
  3. You can save up to £4,000 each tax year, every year until your 50th birthday.
  4. You will receive an annual bonus of 25% (capped at £1,000 p.a.) on any contributions you make from the government.
  5. You are entitled to withdraw your funds tax-free at any time to either :
  • buy a first home worth less than £450,000; or
  • from age 60 for any purpose.
  1. You must ensure that you have had your Lifetime ISA account open for at least one year to be able to put this towards the purchase of your first home.
  2. You are permitted to open more than one Lifetime ISA however you can only pay into one in each tax year.
  3. Should you require to withdraw funds at any other time (e.g. not to purchase your first home or on your retirement), you will be subject to a 25% charge which will be applied to the amount you withdraw.
  4. Tax-free interest will be earned on all balances.
  5. As with the Help to Buy ISA, each person is entitled to open an account meaning double the savings for a couple.
  6. You can hold cash or stocks and shares in your Lifetime ISA (or have a combination of both) -depending on whether you are looking towards the purchase of your first home or if you are looking towards saving for retirement will depend on the type of Lifetime ISA suited to your needs.
  7. Once you reach the age of 50, you will be unable to pay into your Lifetime ISA or earn the 25% bonus however your account will remain open and the savings will still earn interest or investment returns.
  8. You can transfer the funds held in a Help to Buy ISA to a Lifetime ISA. Should you transfer the funds from a Lifetime ISA to a Help to Buy ISA, you would be subject to a 25% charge.

Contact The McKinstry Company Residential Property Lawyers, Ayrshire

If you are considering stepping on to the property ladder, or if you are a parent looking for advice to help children fly the nest, please contact our Property Team on 01292 388048 (Ayr office), 01465 915042 (Girvan office) who will be delighted to assist or complete our online enquiry form and we will get back to you without delay.

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