There is currently no tax efficient savings product specifically designed for first time house buyers.
Subject to further consultation with industry, the government intends to introduce an ISA specifically aimed at first time buyers where the government will contribute towards the ‘savings pot’ accumulated by the individuals. The new accounts need to be opened within four years from the start date of the scheme, which is anticipated to be in Autumn 2015. Once an account is opened there is no limit on how long the saving can be made.
Subject to conditions, where first time buyers choose to save through a Help to Buy ISA, they will receive a government bonus representing 25% of the amount saved up to a maximum of £3,000 on £12,000 of savings. The bonus will be paid when the property is actually bought. Accounts are limited to one per person, rather than one per home so individuals buying a home together can both receive bonuses.
The main conditions are as follows:
- The ISA is available to those aged 16 and over;
- There is no minimum monthly deposit but the maximum monthly saving is £200 per month;
- It is possible, in addition to the monthly £200 to make an initial deposit into the account of £1,000;
- The funds are available on property to be used as a residence by the buyers (not buy to lets);
- The property has to be situated in the UK with a value not exceeding £450,000 for London properties and £250,000 for properties outside London;
- Individuals cannot have an ordinary ISA plus a Help to Buy ISA at the same time.
For those looking to buy their first home, the introduction of the Help to Buy ISA will be a useful way to save for a deposit while obtaining a tax free bonus from the government representing 25% of the amount saved.