The Help to Buy ISA scheme was introduced in December 2015 with the aim of helping young people get on the property ladder.
Up to £200 per month can be saved into the account, with an increased limit of £1200 in the first month being allowed. Any interest you receive on the savings will be paid tax-free. But the big bonus on a Help to Buy ISA is what the government gives you. When you buy your first home, the government will top up your savings by 25%, but the maximum bonus they will pay is £3000.
However, what many people are not aware of is that you cannot use this money as a deposit on your house. This is because the government bonus can only be withdrawn and used after you complete. You can use the funds you’ve saved into the account yourself (along with the tax-free interest) for the deposit as this is paid at the time you exchange.
The other thing to be aware of is a Help to Buy ISA can only be used to buy a home worth up to £250,000, or under £450,000 in London.
Tax-free interest-You won’t pay any tax on the interest you earn
25% bonus-This extra 25% from the Government outweighs any of the top savings rates out there
Double bonus for couples-If you are buying as a couple you can have one account each, so the maximum bonus is £6000
Time-In order to claim the maximum Government bonus of £3000, it would take four and a half years of saving
No interest paid on Gov bonus-This is paid at a flat rate of 25% of the balance of your savings, up to a maximum of £12000 saved
First-time buyers only-A Help to Buy ISA is only available to first-time buyers. You can’t have owned or part-owned a home either in the UK or abroad
Help to Buy ISAs are available until 30 Nov 2019. Providing you have opened your Help to Buy ISA by then you can save into the account. However, you need to claim your Government bonus by 1st Dec 2030.