Help to Buy ISAs versus the Lifetime ISA
With time running out to apply for a new Help to Buy ISA, here we look at the differences between this product and the Lifetime ISA.
THIS ARTICLE IS RELEVANT TO EXAMINABLE TAX YEAR 2019/20.
The Help to Buy ISA was aimed at the first-time buyer market; a bonus was given when the investor specifically bought their first house. This type of ISA will only be available to new investors until 30th November 2019. However, existing account holders can continue investing for another 10 years – until 30 November 2029. It is not required that the Lifetime ISA be used solely to buy a first home; however, any withdrawals made before the age of 60 that aren’t used to buy a first home, will lose the government bonus plus interest or growth from the bonus, and there will be a penalty of 5%.
Here are the fundamental facts regarding both:
| Help to Buy ISA | Lifetime ISA | |
|---|---|---|
| Eligibility: | First-time buyers aged 16 or over | 18 - 40 |
| Bonus: | For every £200 of savings, £50 bonus is paid | 25% bonus to age 50 (after age 50 no contributions can be made but savings will still earn interest or investment returns) |
| Up to a maximum bonus of: | £3,000 (so need to have saved £12,000) Bonus isn’t added to the ISA until a mortgage is completed. | £1,000 per year (potential bonus of £32,000) Bonus paid annually so interest is earned |
| Available for home purchase of up to: | £450,000 in London and up to £250,000 everywhere else bought with a mortgage | £450,000 (if account open for one year) bought with a mortgage |
| Maximum initial deposit: | £1,200 | Up to a maximum of £4,000 per year |
| Maximum monthly savings: | £200 | |
| Part of overall £20,000 ISA allowance? | Yes | Yes |
| Cash or stocks and shares ISA? | Cash ISA | Cash or stocks and shares ISA/combination of both |
Whilst both of these products can be used to save for a first property, the Lifetime ISA has the extra benefit of also being able to provide for retirement, and the government bonus is applied to the account yearly. However, unlike the Help to Buy ISA, there is a penalty to withdraw funds if these are used for any other reason than house purchase or after the age of 60.
Those holding a Help to Buy ISA can transfer their funds into a Lifetime ISA.
Grab the resources you need!
If you’re studying for your CII R01 exam, and you nervous at the thought of exam day, grab our free taster to try out one of Brand Financial Training’s resources for yourself. Click the link to download the R01 mock paper taster now!
Alternatively, you can download the taster for AF1, AF4, AF5, CF1, R02, R03, R06 or R07 if one of those exams is the source of your worry.
