Help-to-Buy and Lifetime ISAs

Help to Buy

The Help to Buy ISA is a scheme designed to boost the amount you’re able to save to put towards a deposit for your first home, with that extra boost being provided by the Government: if you save money into a dedicated Help to Buy ISA, the Government will top it up by 25%. Essentially, this means that for every £200 you save, you’ll receive a Government bonus of £50, up to a maximum bonus of £3,000.

You can save up to £200 per month in the ISA, and when opening you are allowed to make an initial lump sum deposit of £1,200. You’ll need to have saved at least £1,600 in the account in order to receive the bonus, however, as the minimum that can be applied for is £400, and to benefit from the full £3,000 bonus you’ll need to save £12,000 of your own money – which, based on the current monthly deposit allowance, would take just over four years to achieve.

However, as an added boost, the accounts are available to individual first-time buyers and not individual households, which means that both you and your partner could open a Help to Buy ISA and eventually receive a joint bonus of up to £6,000. It’s also worth remembering that the bonus won’t be applied until you physically buy your first home. When the time comes, your solicitor or conveyancer will apply for the bonus, which will be added to the money you’re putting towards your first home.

Lifetime ISA

Oherwise known as a LISA, the Lifetime ISA is the newest type of Individual Savings Account that allows people to save entirely tax-free. It’s a little different to a traditional cash ISA however:

  • It can be opened by someone between the ages of 18 and 39.
  • Instead of having the usual ISA allowance, which for the 2018/19 tax year is an impressive £20,000, you are only allowed to save £4,000 a year – but thanks to the bonus, if you save the full amount, it’ll be topped up to £5,000 (see below).
  • The Government will give you a 25% top-up on everything you save until the age of 50. This means that, if you open an account at 18 and contribute the maximum until you’re 50, you’ll have £32,000 from the Government. Once in your account it counts as your own money, too, which means you can earn interest on the bonus.
  • You can continue saving into it after the age of 50, but you won’t receive the bonus after that point.
  • It’s designed to be an ISA for first-time buyers or retirement savers, and can only be used for one of these purposes – you’ll be charged a penalty if you want to withdraw the funds for anything else.
  • Much like with regular ISAs, you can save in cash (a cash LISA) or invest your funds instead (a stocks & shares/investment LISA).