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Help to Buy ISA
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Lifetime ISA
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Find products
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Find Help to Buy ISAs
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Find Lifetime ISAs
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Eligibility
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Available to any UK resident aged 16+ who is a genuine first-time buyer
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Savers must be aged between 18 and 39
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Investment
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An initial deposit of up to £1,200, then up to £200 per month thereafter
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Up to £4,000 can be saved per tax year
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Bonus
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25% Government bonus on the full amount saved, up to £3,000. The bonus won't be added to your ISA until you complete a mortgage, with the bonus payment arranged on your behalf by your solicitor
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25% Government bonus until the age of 50 (max. £1,000 per year, up to a maximum potential bonus of £32,000). The bonus is paid annually and added to your pot, giving you a higher balance on which to earn interest
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Risk
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The Help to Buy ISA is a form of cash ISA, which means you will get a variable or fixed rate of interest and that your capital is protected (just make sure the provider operates under the FSCS or a similar compensation scheme). As such, it's a zero-risk form of saving, in line with traditional savings products
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Almost all Lifetime ISAs are of the stocks & shares variety, which means your money would be invested in the stock market. This is a lot riskier than investing in a cash ISA as your returns aren't guaranteed, and nor is your initial investment, so you'll need to be prepared for that level of risk. Having said that, there are three cash LISAs in the market at the moment
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Interest
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As a cash ISA, you will have a pretty good idea of the interest that you will get, even if you choose a variable rate account. The exact interest rate will of course depend on what account you choose, so comparing the options and finding a competitive ISA product is crucial
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Investing in a stocks & shares LISA means you won't get a set interest rate. You can secure much larger returns than with regular cash ISAs, but at the same time you also run the risk of losing money due to the unpredictable nature of the stock market. The three currently available cash LISAs do allow you to earn interest in the usual way, though they offer a lower rate than most Help to Buy ISAs.
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Restrictions
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- After an initial investment of £1,200, you will only be able to save up to £200 per month
- You'll need to save at least £1,600 in order to receive the bonus
- To receive the maximum £3,000 bonus, you'll need to save £12,000, which would take just over four years to achieve based on the current investment allowance
- The money must be used to purchase your first property in the UK that costs no more than £250,000 (£450,000 in London)
- The bonus won't be applied until the completion stage of the purchase of your first home - you will never see it yourself
- You can't open a Help to Buy ISA if you've already got an active cash ISA for the tax year; you'll need to transfer your active funds (max £1,200) into a new Help to Buy ISA to open one
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- Can only be opened by people who are between 18 and 39 years old
- You can only save £4,000 per year (which will become £5,000 with the bonus)
- You can continue saving into the account after the age of 50, but won't receive the bonus after that time
- Must be used for a first home in the UK worth up to £450,000 or for retirement (for the latter, funds can be released after the age of 60)
- The funds can only be used for a property purchase after 12 months of having a LISA. They'll be used at exchange and will go straight to your solicitor
- Unlike a Help to Buy ISA, there is a 25% penalty to withdraw your funds from a LISA if you use it for any reason other than those specified, which could leave you with less than you've put in
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