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The End of the Help to Buy ISA Scheme

Posted on 22 November 2019 by Laura Godfrey

The End of the Help to Buy ISA Scheme

The Help to Buy ISA scheme has been available since 1 December 2015, allowing first time buyers to save and qualify for a 25% government bonus of up to £3,000 (on £12,000 of savings) to be used towards the purchase of their first home.

Customers are able to save up to £200 a month and can deposit an initial sum of up to £1,200. The amount of the bonus paid depends on the amount of money saved, with the minimum bonus payable being £400 and the maximum being £3,000. The bonus is available on first time buyer purchases of up to £250,000 outside London and up to £450,000 in London.

Between launch and the end of 2018 almost 300,000 bonuses had been paid via the Help to Buy ISA scheme, supporting almost 220,000 property purchases.

The Help to Buy ISA scheme however will be closing to new customers from 30 November 2019. It will be replaced by the Lifetime ISA scheme.

Customers can still open a Help to Buy ISA until 30 November 2019. Anyone with a Help to Buy ISA will be able to continue paying in until 30 November 2029 and they will have until 1 December 2030 to claim the government bonus. 

From 1 December 2019 customers will therefore have to open a Lifetime ISA instead which is a new kind of ISA, launched in 2017, which does a similar job to the Help to Buy ISA.

There are however differences between the Help to Buy ISA Scheme and the Lifetime ISA Scheme:

  • You must be 18 or over but under 40 to open a Lifetime ISA.
  • You can use a Lifetime ISA to buy your first home or save for later life.
  • You can save up to £4,000 each year into a Lifetime ISA, until you’re 50. The government will add a 25% bonus to your savings, up to a maximum of £1,000 per year.
  • When you turn 50, you will not be able to pay into your Lifetime ISA or earn the 25% bonus. Your account will stay open and your savings will still earn interest or investment returns.
  • You can only withdraw money from your ISA if you’re buying your first home, aged 60 or over or terminally ill, with less than 12 months to live. If you withdraw cash or assets for any other reason you’ll pay a 25% charge based on the total saved at the time in the Lifetime ISA.
  • You can use your savings in a Lifetime ISA to help you buy your first home if the property costs £450,000 or less, you buy the property at least 12 months after you open the Lifetime ISA, you use a conveyancer or solicitor to act for you in the purchase and you’re buying with a mortgage.

A customer can subscribe to both a Help to Buy ISA and a Lifetime ISA in the same year meaning customers can save into both accounts but they can only use the government bonus from one of them to buy their first home. A customer who claims the government bonus from a Help to Buy ISA for a first time buyer residential purchase can’t also make a charge free withdrawal from a Lifetime ISA for a first time buyer residential purchase.

Some savers may decide to transfer funds in their Help to Buy ISA to a Lifetime ISA but there’s no requirement to do so.

Our solicitors and conveyancers at Pardoes have experience dealing with transactions involving both Help to Buy ISAs and Lifetime ISAs, so if you have any queries please feel free to contact any of our offices to discuss.

Posted in: Buying & Selling Your Home