The Help to Buy: ISA is an irresistible little government program designed to encourage UK residents to save money for a first home by providing free matching bonuses on deposits. The program’s best feature is not simplicity — there are enough rules governing them to fill a Tolstoy volume. (Dubious? Be our guest wading through the government website.) But the complexity shouldn’t dissuade you from taking advantage of the perks.
Here’s how it works: any UK resident over the age of 16 can open one at participating banks, building societies and credit unions until 30 November 2019, when the program closes to new savers. The perks: you can deposit up to £200 a month (plus an extra £1,000 the first month you open it) and the government will match 25% of your deposits up to a lifetime £3,000 maximum bonus, provided the funds are used to buy a house under £250,000, or £450k if you’re buying in London. Now here’s the head scratching wrinkle. In 2017, the government introduced something called the Lifetime ISA (LISA), which can be used to buy any first home priced under £450k anywhere in the UK, also promises 25% bonus for deposits, but has much higher potential free government money — £32,000 for those who kick in the maximum contributions, £29,000 more than Help to Buy: ISAs offer. LISA also allows account holders to invest in either stock and share ISAs or cash ISAs — Help to Buys must only be cash ISAs.
So why on earth would anyone choose a Help to Buy over a Lifetime ISA? One big reason: you must hold a Lifetime ISA for a full year before withdrawing from it to buy a house; you’re free to withdraw money from a Help to Buy ISA anytime after you’ve got at least £1,600 deposited, which can be accomplished in three months if you deposit the maximum possible. So if you haven’t opened either account and hope to buy a house in less than a year, you’re probably better off taking advantage of the Help to Buy: ISA while it lasts.