What is a Help to Buy Isa?
Help to Buy Isas are savings accounts which allow first-time buyers to save for a mortgage deposit and then claim a government bonus when they buy their first home.
As with other Isas, any savings deposited in a Help to Buy Isa aren't taxed.
For every £200 you save, the government will pay you a £50 bonus towards the purchase price of a property. This means the government will effectively give you a 25% top-up on savings of up to £12,000, so you could earn a maximum tax-free bonus of £3,000.
The Help to Buy Isa scheme has now closed to new applicants. Savers with existing Help to Buy Isas can continue to use them (and benefit from the 25% bonus) until December 2030.
Video: Help to Buy Isas explained
Watch our short video below to find out how Help to Buy Isas work, and who is eligible to open one.
How much can I pay into a Help to Buy Isa?
You can pay £200 per calendar month into your Isa. When you first open the account, you're allowed to make an additional contribution of £1,000, meaning you can save £1,200 in the first month.
You can withdraw money if you need to, but your deposit allowance won't change. This means that if you contribute £200 at the start of the month and then withdraw it (or some of it), you won't be able to pay anything else in until the next calendar month.
As well as the government contribution, cash in a Help to Buy Isa will earn interest from the bank in the same way as it would in any other Isa.
This interest will count towards the balance the government bonus is based on.
Who can use a Help to Buy Isa?
Any UK resident can have a Help to Buy Isa - but to qualify for the bonus, you need to:
- Use the money to buy your first home; and
- Buy a home costing a maximum of £250,000, or £450,000 in London.
Unlike Help to Buy equity loans, the Help to Buy Isa isn't limited to those buying new-build homes.
The government bonus will only be paid when you buy a property, though, so you won’t get the 25% top-up if you use the money for something else.
If you're saving up to buy a house with another person, you can both open separate Help to Buy Isas, meaning you could potentially get £6,000 extra from the government.
If the person you're buying with is not a first-time buyer, you can open an account and will still qualify for the government bonus on your part of the deposit, but they won't be able to do so for their share.
The property you're buying must be mortgaged in order to qualify for the government bonus.
Help to Buy Isa account holders can take out any kind of residential mortgage (but not a buy-to-let mortgage) and you don't have to get your mortgage from the bank you hold your Isa with.
How does the bonus get paid?
If you've saved up for your mortgage deposit using a Help to Buy Isa and are ready to buy a property, whatever you do, don't just withdraw the money - there's a process you need to follow in order to claim your bonus:
Step 1: Tell the bank that you're ready to buy and would like to close the account. You'll then receive a closing letter from the Isa manager.
Step 2: Give the closing letter to your property solicitor or conveyancer. They will use the letter to apply for your government bonus.
Step 3: The bonus will be transferred to your solicitor.
Step 4: Your solicitor will complete the purchase of your home using the full bonus amount in addition to your deposit.
The bonus will be calculated based on the total amount of money in your Help to Buy Isa at the time of closing, including any interest you've earned from the bank.
Not all of your deposit needs to be held in your Help to Buy Isa, just the amount that you want to be taken into account when the bonus is calculated.
You can only use your Help to Buy Isa bonus for the purchase of the property itself, not other costs such as conveyancing fees. The bonus is paid on completion so can't be put towards the exchange deposit (see below).
Paying an exchange deposit
You'll probably have to pay an exchange deposit of 10% when you exchange contracts with the seller (the point at which you legally commit to buying the property).
You won't be able to put the government bonus towards this, as the bonus is only paid on completion.
If you're taking out a 95% or 90% mortgage and need the bonus as part of your deposit, tell your conveyancer as early on in the process as possible. They should usually be able to negotiate a lower exchange deposit for you.
What if the sale falls through?
If your home purchase doesn't go through after the solicitor has received your government bonus, you can reopen a Help to Buy Isa.
You'll need to ask your solicitor for a 'purchase failure notification' and show it to a bank or building society, who will open an account for you.
In this situation, you'll be able to deposit the full amount you've saved as a lump sum – so if you'd saved £12,000, you can put it all into the Help to Buy Isa at once.
Is there anything else I should know?
For anyone saving up for a mortgage deposit, a Help to Buy Isa is a very attractive option.
However, there are some restrictions:
After the first month, when you can deposit £1,200, you can only save up to £200 a month into a Help to Buy Isa, which works out at £2,400 a year. This means that it would take more than four-and-a-half years of saving into a Help to Buy Isa to benefit from the maximum £3,000 government bonus.
The minimum bonus payment is £400, so you will need to save at least £1,600 in a Help to Buy Isa to qualify for a government top-up.
Help to Buy Isas can only be held by people aged 16 or over, so if you want to save money for your child, a Help to Buy Isa will only work if your child is 16 or above and they open it in their own name (you can then pay into the account).
You can only have one Help to Buy Isa open at any one time (unlike normal cash Isas) but you can transfer between different providers to get the best interest rates.
Frequently asked questions
- When do I need to claim my bonus by? 1 December 2030
- Can the bonus be used on a shared ownership property? Yes
- Can the bonus be used for self-build? No
- Can the bonus be used for stamp duty? No
- If I own a commercial property (but have never owned a residential one) can I get a Help to Buy Isa bonus? Yes
- Can I make multiple deposits in the same month? Usually, as long as they're cumulatively below £200, but this depends on your provider's terms.
The lifetime Isa, launched in April 2017, is designed to help people under 40 buy their first home or save for retirement. Like the Help to Buy Isa, it offers a government bonus on savings.
It is possible to have a Help to Buy Isa and lifetime Isa at the same time - but you can only get the government bonus on one of them when buying a home.
The table below outlines the main differences between the different accounts so you can decide which is the right choice for you.
|Help to Buy Isa||Lifetime Isa|
|How much can |
I pay in each year?
|A maximum of £3,400 in year one |
and £2,400 each year after that.
|Up to £4,000.|
|Can you deposit |
a lump sum?
|No, you’re capped at depositing |
£200 a month, except in the first
month when you can deposit an
|Yes, but no more than £4,000.|
|What is the |
I could receive?
|£3,000 if you save the maximum |
amount of £12,000.
|£32,000 if you save the maximum |
amount of £128,000 over 32 years
between the ages of 18 and 50.
|When is the |
|When you buy a home, upon |
completion. The bonus is usually
paid to your conveyancer.
|What’s the |
|£250,000 in most areas of the UK; |
£450,000 in London.
|£450,000 anywhere in the UK.|
|When can it |
be used to
buy a home?
|Once you've saved at least |
£1,600. This can be done in three
months if the maximum deposits
|You have to have had the |
lifetime Isa for at least a year.
|Who can open it?||New Help to Buy Isa accounts are no longer available.||Anyone aged 18-39 – but if you |
want to put the deposit towards
a property, rather than accessing
it in retirement, you can't have
owned a home before.
|What kind of Isa |
|All Help to Buy Isas are cash Isas.||Lifetime Isas are available as both |
cash and stocks & shares Isas.
|How many |
|New Help to Buy Isa accounts are no longer available.||There are currently 13 lifetime |
Isa providers, offering 14 accounts.
Four of these are cash Isas
and eight offer stocks & shares
Isas. One is only for people
associated with the
Met police, and another is only
accessible to financial advisers.
|Are there fees?||No.||There are no fees with a cash |
lifetime Isa, but there are fees
with stocks & shares accounts.
Fees vary between providers.
|Can I withdraw |
money if I’m
|You can withdraw the money at |
any time, but if it’s not used to
buy your first home you won’t
receive the bonus.
|Yes, but unless you've been |
diagnosed with a terminal
illness or are aged 60 or above,
you'll have to pay a 25%
|How long will it |
be available for?
|New Help to Buy Isa accounts are no longer available. |
Accounts that have already
been opened can be used until 1 December 2030.
|There is currently no end date.|
|Can I transfer |
|You can transfer to another |
Help to Buy Isa. You can also
transfer to a lifetime Isa, but you
can only use the bonus from one
account to put towards buying
|Some lifetime Isa providers will |
accept transfers from a previous
lifetime Isa account, but not all.
If you transfer to a different type
of Isa, you’ll be charged the 25%
|Can I open more |
|No.||You can open more than one |
lifetime Isa, but you can only
open and pay into one each
Find out more: are lifetime Isas any good? Which? investigates
The information in this article is for information purposes only and does not constitute advice. Please refer to the particular terms & conditions of the provider before committing to any financial products.