Help to Buy Isas could benefit some clients, not all

Consumers can use this Isa in conjunction with other government schemes, including the Help to Buy: mortgage guarantee scheme; Help to Buy: equity loan scheme; and shared ownership.

The government provides useful information and frequently asked questions on its website to assist people with Help to Buy Isa queries.

There is also a useful calculator on the government website which can help clients or prospective clients work out whether they might be eligible in the first place for a Help to Buy Isa.

It can gauge whether they will be able to use this vehicle to buy the sort of property for which they are saving.

The Help to Buy Isa is already looking a bit like the poor cousin Patrick Connolly

Key points

■ A cash Isa designed to help people buy their first home.

■ Two strands: a Help to Buy Isa for London, enabling people to buy a first home worth up to £450,000 in London; and an Isa to help people buy a home worth up to £250,000 outside of London.

■ 25 per cent government bonus up to a maximum of £3,000.

■ Couples can hold separate Isas so can both benefit from the bonus.

■ Clients can open a Help to Buy: Isa until 30 November 2019. If they opened the Isa before then they can keep saving into the account.

■ Clients must claim the bonus by 1 December 2030.

According to Simon Bashorun, financial planning team leader at Invested Wealth and Investments, this is a good “tax-incentivised way of saving for a deposit on a first home with a government bonus”.

However, according to Carol Knight, chief operations officer for the Tax Incentivised Savings Association, the Help to Buy: Isa may have its advantages, but also its restrictions.

She explained: “The Help to Buy: Isa is a cash Isa so investors can only subscribe to one in any tax year, not both, and only one can be held at any time. They are not flexible and can only be opened by first-time buyers.”

For Daniel Harrison, senior partner at True Potential Investments, the limits on how much can be saved could be disadvantageous.

“No more than £200 per month can be placed into a Help to Buy Isa,” he stated. “Also, the government bonus for the Help to Buy: Isa has a limit of £3,000. You have to have saved at least £1,600 into your Help to Buy: Isa to claim any bonus.”

Mr Bashorun agreed there are some disadvantages: “As a cash-only product, there might be limits on potential returns and limited contributions mean the Help to Buy: Isa on its own is unlikely to provide an adequate deposit for a property purchase in many parts of the country.”

As the 25 per cent bonus is only given at the time of the property purchase and is paid directly to the lender, it therefore earns no interest.

Mr Bashorun added: “Although access to funds is available at any time, no bonus is payable if funds are withdrawn for another purpose. Moreover, there is a limit to the value of the type of home, which may restrict the buyer’s choice.”

Also, with the advent of the Lifetime Isa, some advisers believe Help to Buy: Isas may not be so attractive. Patrick Connolly, certified financial planner for Chase de Vere, said: “This Isa has perhaps been usurped by the upcoming Lifetime Isa. The Help to Buy: Isa is already looking a bit like the poor cousin.”

He also pointed out such Isas do not always pay the best interest rates, so clients looking to use these Isa savings towards a first home would need to shop around.