Black Friday ISA deal!

The issue

Today is of course Black Friday. Although deals from the taxman tend to be few and far between there is one offer that now has a limited shelf life. At midnight tomorrow (30 November 2019) the government will close the Help to Buy ISA scheme to new accounts. Apparently the scheme is being scrapped due to concerns that Help to Buy ISAs only benefit wealthier individuals and have driven up house prices.

What is the Help to Buy ISA?

The Help to Buy ISA scheme was launched on 1 December 2015.  It enables people saving for their first home to receive a 25% bonus to their savings within the ISA when they buy a UK property worth £250,000 or less (or £450,000 or less for London properties).  Individuals can save up to £200 a month with the government topping up their contributions by 25% up to a maximum of £3,000. Any ‘bonus’ is paid out at the point of house acquisition. Couples buying a house together can therefore receive a government bonus of up to £6,000. 

The schemes have been popular as they allow individuals to save for a house from the age of 16.  Savings could also be withdrawn at any time without penalty (although the Government bonus would then be lost).

What is changing?

The Help to Buy ISA will close to new accounts at midnight on 30 November 2019. However, individuals holding accounts that are opened before the deadline can continue saving with the 25% bonus until 30 November 2029.

For those who miss out, all is not lost as the Lifetime ISA (‘LISA’) – which similarly provides a 25% bonus to individuals between the age of 18 and 40 who want to start saving – will continue to be available.  The bonus for LISAs is payable monthly and if not used to acquire a property will continue as a retirement savings pot.  However, this scheme is slightly more restrictive because if you decide to withdraw the funds before the age of 60 there will be a 25% fixed penalty.

The higher age limit applying to LISAs may make it worthwhile opening a Help to Buy ISA now for individuals aged 16-18 as the account can be transferred to a LISA later.

Forbes Dawson comment

Although there has apparently been a last minute rush for the Help to Buy ISA, arguably its demise is not such a big deal. However, this may remind people to revisit the attractions of a LISA which offers some tempting benefits if used correctly.

 

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