Your IndustryDec 10 2015

How Help to Buy Isa works

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Opening a Help to Buy Isa will, in most ways, be identical to opening a regular Isa under the existing cash Isa rules.

A bank or building society will apply their normal account opening processes, which include a minimum age of 16-years-old and a national insurance number.

However, there are some additional requirements to qualify for Help to Buy Isas.

In particular it is only available for first-time buyers and each first-time buyer can only open one during the lifetime of the scheme.

First-time buyers that choose to save through a Help to Buy Isa will receive a government bonus to help them make the critical first step on the housing ladder.

The bonus will represent 25 per cent of the amount saved, so for the maximum monthly saving of £200, the government will contribute £50, with a maximum government contribution of £3,000 on £12,000 of savings.

The bonus will be calculated and paid when the saver buys their first home.

For basic rate taxpayers, a spokesman for HM Treasury said this will be equivalent to saving completely free of tax for their first home.

Accounts are limited to one per person, rather than one per home, so those buying together can both receive a bonus.

The government’s aim is to provide a scheme that offers a tax-free bonus to help people who are saving up to buy a first home worth up to £450,000 in London or £250,000 anywhere else in the UK.

Accounts can be opened for a period of four years from the start date of the scheme.

Once an account is opened, there is no limit on how long a person can save into a Help to Buy Isa and no time limit on when they can use their government bonus.

As with the Help to Buy mortgage guarantee, the scheme will require an administrator to manage the regular requests to monetise the bonus and monitor the scale of the government’s liability.

The administrator will play a key role in developing the systems and processes that will deliver the scheme. The Treasury spokesman added that there will also be appropriate due diligence and a rigorous monitoring process.

Ultimately, anyone saving to buy their first home should consider a Help to Buy Isa, according to Giles Martin, head of savings at Halifax.

He says it is likely to enable many first-time buyers to save more quickly for a property, and for others, it should make it more affordable as a long term goal.

“As the government bonus is secured at the point of house purchase and after the Help to Buy Isa is closed, savers who change their mind or decide not to buy a property are able to remove their money from the account at any time, but will be no longer eligible for the bonus.”