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The Help to Buy ISA is working

Government statistics* issued on 11 January indicate that those saving for their first home using the Help to Buy ISA scheme get on the property ladder three years earlier than those who don’t.

The median age of a first time buyer utilising the scheme is 27, purchasing property with a mean value of £171,648. This compares to a national average for first time buyers purchasing property valued at £190,679 with a median age of 30.

The Help to Buy ISA launched in December 2015, to help those saving for their first home. A government bonus of 25% is paid when the saver buys their first residential property up to £250,000, or £450,000 in London.

Those in the North of England appear to have made the most of the opportunity, with the highest number of property completions occurring in the North West and Yorkshire & Humber regions.

Whist this is positive news, it’s worth remembering that the Help to Buy ISA is only open to new savers until 30 November 2019. All existing savers have until 1 December 2030 to claim the government bonus and no additional contributions will be permitted from 1 December 2029.

Largely seen as a replacement, the Lifetime ISA was introduced from 6 April 2017. This too can be used by first time buyers to save for a deposit against their first home, but only those aged under 40 are eligible. Until 5 April 2018, savers in a Help to Buy ISA can transfer their account (valued at 5 April 2017) including any interest earned and it will not count towards their Lifetime ISA allowance of £4,000. See our comparison table below:

 

Help To Buy ISA

 

Lifetime ISA

 

Who is eligible?

Individuals aged 16 onwards

Individuals aged 18 - 40

Eligible for Government incentive?

Yes

25% Bonus applied on first home purchase

Yes

25% Bonus applied yearly until age 50. Paid against first home purchase or retirement

Used for first time buyer purchases?

Yes

up to £250,000 outside London

or £450,000 in London

Yes

up to £450,000

Transfers allowed?

Yes

to Lifetime ISA without penalty

prior to 6 April 2018

Yes

Payment limits

£2,400 pa

£4,000 pa

Access available?

Yes, but loss of bonus if accessed other than house purchase

Yes, but loss of bonus if accessed other than house purchase (after 12 months)

or retirement at age 60

 

Most people are familiar with ISAs and it is good to see that first time buyers are benefitting from the government schemes and bonuses being made available. Compared to a conventional ISA, first time buyers can benefit financially by utilising either the Help to Buy or the Lifetime ISA.

ISAs shelter gains from both capital gains and income taxes and can be held as either cash or stocks and shares in any combination. You can only use one cash ISA provider and one stocks and shares provider for each tax year. The maximum permitted to save into an ISA is limited to £20,000, so if you’ve not utilised your allowance this tax year you can still do so until 5 April 2018. The new tax year starts again on 6 April and the ISA allowance remains at £20,000.

For anyone with children and grandchildren, don’t forget the Junior ISA can be utilised, with up to £4,128 available per child until 5 April, rising to £4,260 from 6 April.

For anyone looking for advice on their savings, contact our Financial Planning Consultants on 0808 144 5575 located at offices across Cumbria, Northumberland, Yorkshire and Scotland.

 

* The report can be viewed here: https://www.gov.uk/government/statistics/help-to-buy-isa-scheme-quarterl...

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