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The Help to Buy ISA that was announced in last week’s budget by the Chancellor, George Osbourne, will potentially give first-time buyers a £3000 bonus to help raise a house deposit.  For every £200 that an aspiring homebuyer saves, the Government will chip in £50.  The tax break is capped at £3000, but it means that someone who saves up £12,000 will receive the full amount.  This is particularly good news for a couple saving up for a home together, as they could benefit to the tune of £6000.

The announcement was termed as one of ‘four new steps in a savings revolution’.  Included in this strategy, was the abolition of tax on the first £1,000 of savings income, every year.  He also unveiled a ‘fully flexible’ ISA, which allows savers to take money out of their ISA and put it back in again without losing their tax-free entitlement.  The fourth item in the policy was allowing pensioners to be able to sell their annuities – swapping a monthly income for a one-off lump sum without a large tax penalty.

This Help to Buy ISA will help millions of aspiring first-time buyers who have the means to meet monthly mortgage payments but are struggling to raise the required deposit.  According to figures published by the Council of Mortgage Lenders, 52% of all first-timer purchases were made last year with the help of the so-called ‘Bank of Mum & Dad’.

Savers will be able to make an initial deposit of £1,000, when they open a Help to Buy ISA, and up to £200 per month after that.  The ISA will only be available to first-time buyers purchasing UK properties and the minimum bonus paid out per person will be £400, with the maximum being £3,000.  These bonuses are available for home purchase up to £450,000 in London and £250,000 outside the capital.  The accounts will be available through banks and building societies from the autumn and they will be available for four years.

Source: thisismoney.co.uk, gov.uk/government (image courtesy of Weston-homes.com)