Member Article

First Time Buyers: New Help-to-Buy ISA

One of the new initiatives announced in the 2015 Budget by Chancellor George Osborne was the new Help-to-Buy ISA. The government will pay a 25% bonus to first time buyers saving for a property who chose to open one of these new ISA accounts.

Under the scheme, up to £200 per month can be deposited into the account and the 25% bonus from the government will then be paid when the property is purchased. The ISA can be used on properties up to the value of £450,000 in London and £250,000 outside of London.

Available from Autumn 2015, new accounts can be opened for four years with a maximum initial deposit of £1,000. Accounts are limited to one per person not one per household, so couples or friends buying together can each receive the bonus, between a minimum of £400 and up to a maximum of £3,000.

This means that if a first time buyer saves a £12,000 deposit towards their first home, the government will make this into £15,000 and for a couple buying together this would make a total deposit of £30,000.

Richard Ponton, Director at Newcastle Estate Agency, Walton Robinson, comments; “The Government offering 25% top-ups on first time buyers’ deposits sounds promising and will hopefully stir interest in first time buyers saving for their own home. In reality, the promise of this gift may just help fuel prices further, and given that the main cause for unaffordability is not enough houses being built, any positive effect may peter out fairly quickly.”

ISAs are also due to become ‘fully flexible’ with the ability to draw money out and replace it later in the same tax year without losing any tax-free entitlement.

Another boost for savers is the new personal savings allowance of £1000 for basic rate taxpayers, which will come into force in April 2016. The Chancellor said; “People have already paid tax once on their money when they earn it. They shouldn’t have to pay tax a second time when they save it”.

This was posted in Bdaily's Members' News section by Sally Bettinson .