Help to Buy ISA: rules, interest rates and FAQ

If you’re saving towards buying a home in the UK, a Help to Buy ISA could be a very useful product for you.

But what actually is a Help to Buy ISA, and who’s eligible to open one? We’ll cover everything you need to know here in this guide, including the rules, how to open one and those all-important interest rates.

Maybe you want to earn a return in multiple currencies? With Wise Interest, you can get a 4.70% variable rate on your GBP balance held in your Wise multi-currency account.

Capital at risk. Current rates do not guarantee future growth.

Variable rate is based on 7 day performance as of 10 Aug 2023. This fund has returned an 0.93% annual average over the last 5 years, excluding Wise and fund manager fees. See full 5 year past performance of funds.

What is a Help to Buy Individual Savings Account (ISA)?

A Help to Buy ISA is a government-run scheme aimed at people wanting to buy a home in the UK. Crucially, it’s only for first-time buyers, to help them save towards a mortgage deposit.

Like other types of ISA products, the Help to Buy ISA offers tax-free savings up to your personal allowance. Accounts offer interest rates, as well as tax-free bonus on your savings provided by the government.

Unfortunately, you can no longer open a new Help to Buy ISA in the UK. But if you already have one, you can continue to save into it and receive the government bonus.¹

How does a Help to Buy ISA work?

A Help to Buy ISA works just like an ordinary savings account, but with one key difference. You’ll open an account and deposit funds, but the government will top up your contributions with an extra bonus - up to a limit. This helps your savings grow faster. On top of this, Help to Buy ISAs also offer interest on your balance.

There are a few strings attached though. You’ll only be able to pay in up to £200 a month, and you’ll need to save at least £1,600 in order to receive the government bonus. The maximum you can save in a Help to Buy ISA is £12,000.¹

You’ll only get the government bonus when you buy your property, and need to hand over the deposit. Once your offer on a property has been accepted, you’ll need to ask your conveyancer to apply for the bonus.

How much is the state-added bonus?

The government bonus for Help to Buy ISAs is 25%.¹ Here’s a look at how much this works out as, depending on how much you save:¹

What are the rules for qualifying for Help to Buy ISAs?

The Help to Buy ISA rules are a little strict, but it could be worth it to help you save for a deposit - which can be difficult while renting a home at the same time.

To be eligible, you’ll need to be:¹

• Living in the UK and buying a home there
• At least 16 years old
• A first-time buyer, who doesn’t already own a property
• Buying your property with a mortgage
• Buying a home worth up to £250,000 (or up to £450,000 if in London)
• Planning to live in the property, not rent it out.

What are the interest rates for Help to Buy ISAs?

As you can no longer apply for a Help to Buy ISA, not many providers have products available.

Here are just a handful of UK banks that are still advertising their Help to Buy interest rates, which are expressed as AER variable. This stands for Annual Equivalent Rate, and shows you how much you’ll earn over the course of a whole year. Variable means that the rate can change at any time.

Withdrawing and closing your Help to Buy ISA

With Help to Buy ISAs, withdrawals are possible, and even unlimited with some providers.⁴ But bear in mind that you won’t get the government bonus on anything you take out.

When you want to buy your home and use your savings (and bonus) for your deposit, you’ll need to close your account. Then, you can claim your bonus through your conveyancer.

If you close your ISA and transfer it to another non-ISA savings account, you’ll lose the tax-free status on your savings.

FAQ – Help to Buy ISA

Now, let’s run through a final few questions you might have about the Help to Buy ISA.

Can I still open a Help to Buy ISA?

No, new applications for Help to Buy ISAs closed on 30th November 2019. If you already have an account, you can keep saving in it until November 2029.¹

Can I switch between different Help to Buy ISA providers?

Even though the Help to Buy Scheme is no longer available to new customers, you can still switch between providers if you already have an ISA open.

Some banks such as Barclays or HSBC will let you transfer your ISA over from another provider – the latter as long as you have an HSBC savings or current account.²

Can I use the state-added bonus towards the deposit?

Yes, you can use any government bonus you’ve earned towards the deposit for your new property.

Can I buy a house over £250,000 with Help to Buy ISA?

Only if you’re buying a property in London, where the maximum value limit is raised to £450,000 (as property prices are much higher in the capital).¹

Can I transfer Help to Buy ISA to Lifetime ISA (LISA)?

You should be able to transfer a Help to Buy ISA to a LISA. You won’t get the Help to Buy bonus, but any money you transfer will qualify for the LISA bonus (which is also 25%).¹

And that’s it - all the essentials you need to know about the Help to Buy ISA scheme.

Sources used:

Sources last checked on date: 30-May-2023