Help to Buy ISAs are now closed to new applicants. However, there are other options still available to first-time buyers.
What is the Help to Buy ISA?
Potential first-time buyers are no longer able to apply for a Help to Buy ISA, after applications closed on 30th November. Savers who already have an account will be able to keep saving into it until 30th November 2029. The Help to Buy ISA was introduced to help first-time buyers over the age of 16. Individuals receive a bonus of 25% of their savings when it comes to purchasing a property, up to a value of £3,000. They can put £1,200 into the ISA in the first month, while subsequent payments are limited to £200 a month. The final criteria is that the property purchase cannot exceed £250,000 (£450,000 for London) if the buyer wants to receive the 25% boost.
How does the Lifetime ISA differ?
The Lifetime ISA is designed to help people aged between 18 and 40 to save towards their first home or for later life. The Government will again give a bonus worth 25% of what is paid in, up to a maximum of £4,000 per year. Savers can then receive a maximum of £1,000 per year as a government bonus. This can be used to buy a home worth up to £450,000 anywhere in the country.
Both ISAs can be helpful when it comes to saving for a first-time property purchase, although there are some marked differences between the two.
The Lifetime ISA rules mean that savers have to wait at least a year before they can use it to buy a home. With the Help to Buy ISA, individuals have to have saved £1,600 before they can claim the minimum government bonus of £400 but this can be done over a period of three months: £1,200 in the first month followed by two subsequent deposits of £200 in the next two months.
It is possible to spread deposits across multiple ISAs. However, the maximum that can currently be saved in ISAs is £20,000 for the 2019-2020 tax year.
Helping your children get their first house
Given the struggles the younger generation face to get on the property ladder today, you may be wondering the best way to give financial support. If you’re considering giving your child enough money for a deposit, there are no immediate tax implications. You can give as much money as you like to your children tax free, but if you were to pass away within seven years of the gift, they could be faced with an inheritance tax bill if your estate was worth more than £325,000. You can gift up to £3,000 a year without paying inheritance tax.
If you would like to know more about gifting money to your children, or any other options which may help with a deposit on a house, don’t hesitate to get in touch.
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YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER LOANS SECURED ON IT.