Guide to Help to Buy ISAs

Help to Buy ISA

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Help to Buy individual savings accounts (ISAs) are aimed at first-time buyers wanting to save a deposit to get on the property ladder.

Houses on a street

The government provides a cash bonus to boost Help to Buy ISAs. It’s worth up to £3,000, with the actual amount you’ll get dependent on how much you save.

You also earn interest on your savings of around 2%, depending on which provider you choose.

Here’s what you need to know…

How Help to Buy ISAs work

The Chancellor George Osborne first announced plans for Help to Buy ISAs in his March 2015 Budget, and these accounts were eventually launched on December 1 2015.

You can pay in up to £1,200 in the first month that you open a Help to Buy ISA, and after that your maximum monthly contributions are capped at £200.

Unlike cash ISAs, where you can have several accounts opened in different tax years, you’re only allowed one Help to Buy account at any one moment. 

You can, however, transfer from one provider to another if you find a better interest rate elsewhere.

Government contributions

The best thing about Help to Buy ISAs is that the government will contribute to your account on your behalf, topping up your payments by 25%. 

That means for every £100 you pay in, the government will pay in another £25.

These contributions are on top of any interest you earn.

Total government contributions cannot exceed £3,000, and you’ll only get this amount if you have paid in £12,000. This will take five years to do, assuming you pay in the maximum monthly contribution of £200 a month. 

You can choose any kind of mortgage from any provider, as long as it is a residential mortgage and not a buy-to-let mortgage.

If you pay in £1,200 in the first month, as permitted, then put in £200 a month, you’ll reach £12,000 in four years, 7 months.

You don’t have to pay into the account for this long though. If you only want to save for a couple of years or even less, that’s fine, but bear in mind you won’t be able to earn the maximum bonus.

The minimum bonus the government will pay is £400, and to be eligible for this, you must have saved at least £1,600 into your account. 

Bonus structure

Here’s how much you need to save to qualify for different bonuses you can expect depending on the amount you save:

£400 bonus (minimum bonus) - you must save £1,600 

£500 bonus - you must save £2,000

£750 bonus - you must save £3,000

£1,000 bonus – you must save £4,000

£1,250 bonus – you must save £5,000

£1,500 bonus – you must save £6,000

£1,750 bonus – you must save £7,000

£2,000 bonus – you must save £8,000

£2,250 bonus – you must save £9,000

£2,500 bonus – you must save £10,000

£2,750 bonus – you must save £11,000

£3,000 (maximum) bonus – you must save £12,000

The bonus is only paid to you once you reach the completion stage of buying your home, and it goes to your mortgage lender via the solicitor who is managing your property purchase. 

This means you won’t be able to use the bonus to help pay for the initial deposit (usually 10%) required when you exchange contracts. 

If you’re concerned you won’t be able to afford the initial deposit without receiving the bonus, it’s worth asking the seller’s solicitor if you can pay a smaller deposit at this stage and pay the remainder at completion – when you have received your bonus.

If the seller won’t allow this, you’ll need to fund the shortfall yourself and then use the bonus towards your mortgage payments.

Your solicitor will only be able to apply for the government bonus once you’ve provided him or her with a closing letter from your Help to Buy ISA provider. There will usually be a charge from your solicitor for sorting this out, typically around £50.

If you decide you don’t want to buy a property after all, you won’t be entitled to a bonus, but you’ll still get your savings and any interest you’ve earned. 

Who qualifies?

You must be a first-time buyer aged 16 or over to be eligible to open a Help to Buy ISA.  

If you’ve owned a property in the past, or part of one, you won’t qualify. You also won’t be eligible if you’ve ever inherited a property.

You can only open an account on your own or, if you are saving with a partner to get on the property ladder, each of you can open a Help to Buy ISA.

The money you save into a Help to Buy ISA must be put towards a property which costs no more than £250,000, or £450,000 if you live in London.

Once you’ve opened a Help to Buy ISA, you can’t open a cash ISA in the same tax year. If you’ve already opened a cash ISA this tax year, which started on April 6, 2015, you’ll have to take out your money before you can start paying into a Help to Buy ISA.

If you’ve got £1,200 or less in your cash ISA, you can transfer this money directly into a Help to Buy ISA. You’ll have to move the full amount though – partial transfers aren’t allowed.

Some Help to Buy ISA providers, however, allow what is known as a ‘split ISA’. This means that you can effectively hold a Help to Buy and a Cash ISA in the same wrapper, provided their combined value doesn’t exceed the £15,240 maximum you can invest in ISAs this tax year.

The downside of opting for a split ISA is that rates may be lower if you link your ISAs together.

Once you’ve chosen a Help to Buy ISA, remember that you don’t have to take out your mortgage with the same provider. 

You can choose any kind of mortgage from any provider, as long as it is a residential mortgage and not a buy-to-let mortgage.  

The mortgage you choose does not have to be a Help to Buy mortgage, although it can be if you want.

Running your account

Once you’ve chosen a provider and made your initial deposit into your Help to Buy ISA, you can then set up a standing order for up to £200 a month to be paid into the account.

You can make withdrawals from your account whenever you want, but you won’t be able to claim any bonus on the funds you’ve taken out.

Interest on your account will usually be calculated daily and paid yearly on the anniversary of the date you opened your account. 

Savings held in a Help to Buy ISA are covered by the UK Financial Services Compensation Scheme (FSCS), which protects up to the first £75,000 (as of January 2016) per person, per financial institution in the event that the bank or building society supplying the account goes bust.


Help to Buy ISAs will be on sale until 30 November 2019.but if you’ve already opened one by then, you can keep it running until December 2030, when you must claim your bonus from the government of the day.

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