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What is a Help to Buy ISA?

Written by Reviewed by Emma Lunn

5th Mar 2020 (Last updated on 22nd Oct 2020) 8 minute read

Introduced by the government in 2015, the Help to Buy ISA is part of the Help to Buy scheme created by the government to help mainly first-time buyers purchase a home. The scheme offers a 25% government bonus in addition to your savings to put towards a house deposit. 

Whilst the scheme closed to applicants in November 2019, those with a Help to Buy ISA open can still pay into their ISA until November 2029 and must claim their bonus by 1st December 2030. 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. 

Compare My Move work with property experts to bring you the latest and most in-depth guides on everything moving house. In this guide, Compare My Move explains what a Help to Buy ISA is, how much you can put in your ISA and how to access the government bonus. 

This article will cover the following:
  1. How Does Help to Buy Work?
  2. Can I Open a Help to Buy ISA?
  3. Help to Buy ISA Eligibility
  4. How Much Can You Put in a Help to Buy ISA?
  5. How to Claim Help to Buy ISA Bonus?
  6. What Can I Spend the Bonus On?
  7. What If I’m Buying With Someone Else?
  8. What if the Sale Falls Through?
  9. What is a Lifetime ISA?
  10. Lifetime ISA vs Help to Buy ISA
  11. Can I Transfer Money From A Help To Buy ISA To A Lifetime ISA?
  12. Which ISA is Best For You?
  13. Save on Your Property Purchase with Compare My Move

How Does Help to Buy Work?

Help to Buy is a government initiative to help first-time buyers as well as those struggling to switch from renting to buying, get on the property ladder. All schemes include some sort of government bonus or discount which can help first-time buyers and those struggling to buy a house save money towards a deposit

There is a range of products under the help to buy scheme, including:

  • Help to Buy: Equity Loan
  • Help to Buy: Shared Ownership
  • Help to Buy: ISA.

To work out how much you could borrow with the Help to Buy: Equity Loan, use our Help to Buy Calculator

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Can I Open a Help to Buy ISA?

The Help to Buy: ISA closed to applicants in November 2019. If you have an account open, you can still pay money in until November 2029 and claim your government bonus by 1st December 2030. 

Help to Buy ISA Eligibility

As you can no longer open an ISA, the house you are buying must meet certain criteria to be eligible to receive the government bonus. It’s important to note, just because you have an ISA open it doesn’t automatically mean you can claim the bonus. You must meet the following criteria:

  • The property must be in the UK.
  • The property can’t be more than £250,000 (or £450,000 in London).
  • The property must be your main residence.
  • The property must be bought with a mortgage.

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

You can pay up to £200 each month into your ISA and the government will top up your savings by 25%. 

The maximum you can save is £12,000 and you will receive the maximum government bonus of £3,000, giving you £15,000 to put towards a house deposit. To get the minimum government bonus of £400, you will need to have saved £1,600 into your ISA. 

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

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.

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How to Claim Help to Buy ISA 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. 

It’s also 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.

You must claim your bonus by 1 December 2030.

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.

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 £6,000 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.

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What is a Lifetime ISA?

You can save up to £4,000 per year in a Lifetime ISA and the government will add a 25% bonus (so up to £1,000 a year). However, you must use the money to do one of the following:

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

Any UK resident can open a Lifetime ISA if they are aged between 18 and 39 and you can pay into a Lifetime ISA up until the age of 50. If you saved the maximum of £4,000 every year from the age of 18 until 50, the Government bonus would be a total of £32,000. 

A Lifetime ISA can either be cash or stocks and shares. A Cash ISA is a safer option than a Stocks and Shares ISA as there is no risk to your capital. A Stocks and Shares ISA is riskier, but there is also the potential for greater returns.

Lifetime ISA vs Help to Buy ISA

Both the Lifetime ISA and Help to Buy ISA offers a 25% government bonus to help with your first house purchase. Whilst the Help to Buy ISA is more flexible with the way you save, the Lifetime ISA allows you to receive a bigger bonus. 

Here is how the How to Buy ISA and Lifetime ISA compare.

FAQHelp to Buy ISALifetime ISA

Who’s it for?

First-time buyers

First-time buyers and those saving for retirement

Age of applicants

16+

18 to 39

Is there a minimum monthly deposit

No

No

What can you invest in?

Cash

Cash or stocks and shares

Deposit limit

Maximum of £200 each month

Capped at up to £4,000 per tax year

Bonus limit

£3,000 

£32,000

Property price cap

Up to £250,000 across the UK, up to £450,000 in London 

Up to £450,000 across the whole of the UK 

Where does the bonus go?

Bonus is added after purchase is complete by your conveyancer or solicitor

Bonus is paid directly into account on a month-by-month basis

Withdrawal

Withdraw funds at any time. You will not receive the 25% bonus on funds withdrawn for anything other than your first house

25% charge of funds not used towards your first house and you're aged 60 or under

Can be used for exchange deposit?

No

Yes

Can be used for a mortgage deposit?

Yes

Yes

Can I Transfer Money From 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.

Which ISA is Best For You?

The Lifetime ISA offers a much more attractive bonus – up to £32,000 in total. Because the bonus is paid into your account each month, you can earn interest on it which will further boost your savings. With a Lifetime ISA, you can invest in the stock market, not just cash.

The Lifetime ISA has a more generous property cap and can be used for both the exchange deposit and the mortgage deposit. 

However, you have to wait a year before using your Lifetime ISA towards a new house – but you can cash in your Help To Buy ISA whenever you want. If you don’t already have a Help To Buy ISA, the Lifetime ISA is your only option as it’s no longer possible to open a new Help To Buy ISA.

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.