Budget 2015 contained proposals for a new Help to Buy ISA, designed to help first-time buyers save a deposit to purchase their first home. Broadly, from Autumn this year, most first-time buyers will be able to save up to £200 a month towards their new home and the government will boost their savings by 25%.
Key features of the new ISA are as follows:
- new accounts will be available for four years, but once an account is open there is no limit on how long the investor can hold it;
- initial deposits of £1,000 can be made when the account is opened in addition to normal monthly savings;
- there is no minimum monthly deposit, but up to £200 may be saved each month;
- accounts are limited to one per person rather than one per home, so those buying together can both receive a bonus;
- the scheme is only available to individuals who are 16 and over;
- the bonus is available to first-time buyers purchasing UK properties;
- the minimum bonus payable is £400 per person, and the maximum is £3,000 per person;
- the bonus will be available on home purchases of up to £450,000 in London and up to £250,000 outside London, and
- the bonus will be paid when the investor buys their first home.
The maximum that can be saved in a Help to Buy ISA is £12,000. The government bonus is added to this amount, so total savings towards the property purchase can be up to £15,000. Since accounts will be limited to one per person rather than one per home, a couple buying together will be able to save up to £30,000 towards the purchase of their first home. It will take around four and a half years to achieve this level of savings under the scheme.
The bonus can be claimed once savings have reached the minimum amount of £1,600. There are however, certain restrictions under the new scheme, including:
- Help to Buy ISAs cannot be used if the property is to be rented out;
- purchases of overseas property do not qualify under the scheme;
- only one Help to Buy ISA may be held by an individual, and
- investors cannot open a Help to Buy ISA and a normal cash ISA in the same tax year. Anyone planning to open a Help to Buy ISA later this year should not open a new cash ISA in this tax year. It is not permissible to hold both.
For further commentary on ISAs generally, see Bloomsbury Professional Income Tax Annual at 4.25ff.
Sarah Laing is the author of Bloomsbury Professional Core Tax Annual: Income Tax 2015-16 and Bloomsbury Professional Partnership Taxation 2015-16.