FIRST-TIME BUYER? TAKE ADVANTAGE OF THE NEW HELP-TO-BUY ISA
The new Help to Buy ISA scheme, due to launch in August 2015 and available to first-time buyers, will see a £200 p.m. tax-free investment topped up by a 25% government cash-bonus. This is to help first-time buyers get onto the housing ladder.
Who can apply?
The Help to Buy ISA is only available to first-time buyers who wish to purchase a property as their main residence. It is not a buy-to-let scheme, and a scheme administrator will oversee this area to ensure that the government’s cash bonus is going to the right people.
You could double your investment, it’s per household, not per person
Accounts are limited to one per person rather than one per household, so people who intend to purchase a property together could both take advantage of the government bonus.For basic rate taxpayers, this is equivalent to saving completely tax-free for their first home.
When and for how long?
Savers can open a Help to Buy ISA for a four-year period after August 2015 when the scheme formerly launches. Once an account is opened there is no limit on the period in which a person can save into a Help to Buy ISA and no time limit on when they can use their government bonus.
How does it work?
The Help to Buy ISA allows you to make a maximum monthly investment of £200 tax free up to a total of £12,000; this investment is topped up by a government bonus of 25%.
Under the scheme you are allowed to make an initial deposit of £1,000. This means that in the first month you could invest £1,000 as your initial deposit plus your £200 monthly deposit allowance, all tax free. That is a very nice tax-free investment, which when you’re ready to purchase your property, government tops that up by 25%.
How much can you invest?
The 25% bonus from the government is capped at £3,000. This means that the total amount you can invest over the period of the ISA and attract the bonus is £12,000. The bonus will apply to both the amount a person saves and the interest accrued since the account was opened.
How is the money allocated?
The money saved in a Help to Buy ISA, plus interest, plus the bonus will be calculated and paid when you are ready to buy your first home. The government bonus will only be paid towards the purchase of a first home located in the UK, with a purchase value of £450,000 or less in London, and £250,000 or less in all other parts of the UK.
How little can you save?
The government bonus can be claimed at any time, but it is subject to a minimum bonus amount of £400. The government bonus will be calculated by the scheme administrator on the account balance at the point of claim.
For more guidance
We’ll keep you posted about details of the scheme when it opens. You have four years from August 2015 to apply for the scheme and take advantage of this generous government giveaway. Call your account manager to discuss further, or Download PDF: