Much like the existing ISA accounts available on the market, the Help to Buy ISA is a tax efficient way of saving money with interest gained being free of income and capital gains tax. The added bonus with this particular ISA is that the government are willing to boost your savings by 25%
From 1st December 2015 anyone that opens a Help to Buy ISA will be eligible to receive a total of £3,000 from the government towards a deposit on their first home. For every £200 you save the government will give you £50. The maximum amount that you can save with this ISA however is £12,000, but with the top up of £3,000 from the government you can achieve a total of £15,000 to put down on a home.
There are strict criteria and rules that apply with this new scheme such as:
- The account can be opened with an initial deposit of up to £1,000.
- £200 is the maximum monthly amount you can pay into the account.
- The account must hold a minimum of £1,600 before the government top up bonus will begin. You will be awarded £400 at this point.
- Only one ISA can be opened per person, however if you are a couple looking to buy a home together you can each open a help to buy ISA providing you with the opportunity to secure up to £6,000 towards a deposit.
- The bonus money can only be put towards a property worth £250,000 or less or in London up to the value of £450,000
- The bonus money cannot be used to pay for any other costs e.g. legal fees, it is only to be used for the deposit
- The government bonus will not be paid into your account but paid directly to the solicitors at the time of property purchase.
- The scheme will be closed to new savers after the 30th November 2019
There are a variety of UK banks that are operating these schemes, some such as Halifax are offering interest rates of up to 4% tax free / AER variable.
For further information on the help to buy ISA visit the help to buy government website.