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What is a Help to Buy ISA?

Written by Reviewed by Emma Lunn

5th Mar 2020 (Last updated on 22nd Jul 2020) 1 minute read

Introduced by the UK government in 2015, the Help to Buy: ISA is a savings account designed to help first-time buyers get on the property ladder.

It’s no longer possible to open a Help To Buy ISA – it closed to new applications on 30 November 2019. But people who already have a Help To Buy ISA can add money to their accounts until November 2029.

The Help to Buy: ISA benefits from a government bonus, boosting savings by 25%. For example, for every £200 saved, you would receive a government bonus of £50.

In this guide, Compare My Move explains the Help to Buy ISA, what you need to know when it comes to saving and how you can best utilise your account for buying your first home.

This article will cover the following:
  1. Who is the Help to Buy ISA for?
  2. How Much Can You Put in a Help to Buy ISA?
  3. Does a Help to Buy ISA Earn Interest?
  4. How Can I Access the Government Bonus?
  5. What Can I Spend the Bonus On?
  6. What If I’m Buying With Someone Else?
  7. What if the Sale Falls Through?
  8. What is the Difference Between a Help to Buy ISA and a Lifetime ISA?
  9. Can I Transfer Money In A Help To Buy ISA To A Lifetime ISA?
  10. What is the Difference Between a Help to Buy ISA and the Help to Buy Schemes?
  11. Save on Your Property Purchase with Compare My Move

Who is the Help to Buy ISA for?

The Help To Buy ISA was designed for people saving to buy their first home. It was available to anyone aged over the age of 16.

ISA stands for Individual Savings Account. It’s a type of savings account on which returns (interest) are paid tax-free. The Help To Buy ISA is a type of Cash ISA.

If you have a Help to Buy ISA you can use the money in it to purchase a home worth up to £450,000 in London, or £250,000 elsewhere in the UK. You must be a genuine first-time buyer and plan to live in the property (not let it out).

A Help To Buy ISA doesn’t mean you have to use the Government’s Help To Buy scheme to purchase a property – it’s completely separate.

Those who opened a Help to Buy ISA before the deadline are able to use it to purchase a home worth up to £250,000 - or £450,000 in London

It’s worth noting that you are not restricted to using a Help to Buy mortgage with a Help to Buy ISA. You will have access to any residential mortgage, except for a buy-to-let mortgage.

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How Much Can You Put in a Help to Buy ISA?

You can contribute up to £200 each month to your Help to Buy up until November 2029. You were allowed to add an extra £1,000 in the first month your ISA was open.

The Government adds 25% to your savings. So if you save £200 a month, it will add £50.

The maximum amount of Government bonus is £3,000. To get this, you will need to have saved £12,000.

The minimum Government bonus is £400. To get this, you will need to have saved £1,600.

You don’t have to save money into your Help To Buy ISA every month,  but you can’t rollover your allowance. So if you don’t have money one month, you can’t put double the amount into your account the next month.

Does a Help to Buy ISA Earn Interest?

As well as receiving the Government bonus, you will also earn interest on the money you put into your Help to Buy ISA.

The interest rates will vary and are set by each provider. You won’t earn interest on the Government bonus.

You can switch ISA providers to make sure you are always getting the best interest rate. You’ll need to do the switch through your ISA provider to avoid accidentally withdrawing the money. This would result in the amount losing its tax-free status and eligibility to receive the Government bonus. 

How Can I Access the Government Bonus?

Once you are close to completing the purchase on your first home, you should instruct your conveyancing solicitor to apply for your government bonus on your behalf. 

By this point, you will have been liaising with your conveyancer fairly regularly on various matters in the house buying process. Once they receive the bonus it will be added to the funds you are putting towards your home. 

You must claim your bonus by 1 December 2030.

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What Can I Spend the Bonus On?

The Help to Buy ISA bonus can be used towards a property costing £250,000 or less across the UK - or £450,000 or less with London. The bonus will go towards the deposit at completion - often referred to as the mortgage deposit

The mortgage deposit is the final deposit where you legally become the property owner. Putting down a deposit reduces the amount you need to borrow as a mortgage.

As you will receive the bonus once the sale is completed, you won’t be able to use the bonus for the home exchange deposit used to secure the property. Although you can use the money you’ve saved for the exchange deposit, you cannot use the bonus.

What If I’m Buying With Someone Else?

When buying a property with someone else - such as a family member, partner or friend - you are still able to use the Help to Buy ISA. The Help to Buy ISA is per individual, not per property, so more than one Help to Buy ISA account can be used to buy a home. 

For example, if you are buying a property with your partner, providing you are both first-time buyers, you can both use a Help to Buy ISA to buy a property. If you both save the maximum amount, you can gain up to £6000 bonus from the government between you.

It’s also possible to use the Help to Buy ISA to purchase a property if only one of the buyers is a first-time buyer. If you are buying with someone who has previously owned a property, you are still able to use the Help to Buy ISA and the government bonus for your share of the property. 

What if the Sale Falls Through?

If the sale doesn’t go through after you have closed your Help to Buy: ISA, you can reopen your account by confirming your purchase didn’t complete. 

Your solicitor or conveyancer can give you a Purchase Failure Notification to take to your bank, building society or credit union and they will reopen the account for you. In this instance, you will be able to deposit your money as a lump sum. 

What is the Difference Between a Help to Buy ISA and a Lifetime ISA?

The Lifetime ISA is open to UK residents between the ages of 18 to 40. You can save up to £4,000 a year in a Lifetime ISA, until the age of 50, and the Government adds a 25% bonus.

This means you can get a bonus of up to £1,000 a year. If you save £4,000 a year from the age of 18 until 50, the bonus will be £32,000.

You need to hold a Lifetime ISA for at least 12 months before you get any bonus.

You need to use the money in a Lifetime ISA to do one of two things:

  • Buy your first property
  • Fund your retirement after the age of 60

This article explains the differences between a Help to Buy ISA and Lifetime ISA 

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Can I Transfer Money In A Help To Buy ISA To A Lifetime ISA?

Yes, however the funds you transfer will count towards the £4,000 annual limit for the Lifetime ISA (and therefore cannot exceed this figure).

You will not receive the Help to Buy bonus, but your transferred funds will qualify for the Lifetime ISA bonus.

What is the Difference Between a Help to Buy ISA and the Help to Buy Schemes?

The Help to Buy ISA is completely separate to the Help to Buy: Equity Scheme or the Help to Buy: Shared Ownership.

The Help to Buy: Equity Loan is a shared equity scheme that is available for those looking to buy a new-build home. Typically a deposit of 5% is required and the government or developer lends the rest of the deposit - up to a further 20%. 

The Help to Buy: Shared Ownership offers hopeful homeowners the chance to buy a share of a home (between 25% and 75% of the home’s value) and pay rent on the remaining share. 

If you would like to read moree concerning the differences between the shared equity and shared ownership schemes, Compare My Move have created a helpful article further discussing the two schemes and how they could help different people. 

Save on Your Property Purchase with Compare My Move

When it comes to moving house, Compare My Move are here to help. From comparing conveyancers, hiring a chartered surveyor and helping you find a removal company, we’ll be there for you. Compare your move with us and save up to 70% on the costs along the way.

Adele MacGregor

Having written for PerformanceIN, WalesOnline, Grazia Magazine and The Olive Press, Adele now writes advice articles for home movers, first-time buyers and house sellers alike.

Emma Lunn

Reviewed by Emma Lunn

Freelance Personal Finance Journalist,

Emma Lunn is an award-winning journalist who specialises in personal finance, consumer issues and property.