Which ISA is best for first-time buyers - the Help to Buy ISA or the Lifetime ISA?


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If you’re a first-time buyer, you may have heard about two Individual Savings Accounts (ISAs) which could help you save up to buy your first home – the Help to Buy ISA and the Lifetime ISA.

Although both ISAs offer tax-free savings and a 25% bonus from the government on the amount you pay in, there are some key differences – which we’ve summarised below to help you consider the pros and cons of each ISA and decide which one is more suitable for your needs.

Help to Buy ISA Lifetime ISA
Who’s eligible? First-time buyers aged 16+. Anyone aged 18-39.
What can I use it for? To buy your first home. To buy your first home and/or save for later life.
What can I pay in? Up to £200 a month. Up to £4,000 a year until you’re 50.
Can I invest a lump sum? Only for the first payment, when you can pay in up to £1,200. Yes.
What’s the bonus? The government will add a 25% bonus to your savings, up to a maximum of £3,000 in total. The government will add a 25% bonus to your savings, up to a maximum of £1,000 a year until you turn 50.
When and how will I get the bonus? On completion of buying your first home; your solicitor will apply for it. Annually; it will be added to your savings.
Will I earn interest on the bonus? No, because it’s only paid when you buy your first home. Yes, because it’s added to your savings every year.
When can I use the savings to buy a property? Any time after you’ve saved at least £1,600 (the amount required to receive the minimum bonus of £400). Any time, but if you take money out within the first 12 months, there’s a 25% withdrawal charge.
What’s the maximum I can spend on a property? £250,000 (or £450,000 in London). £450,000 anywhere in the UK.
Can I withdraw the money for another reason? Yes, but you won’t receive the bonus on the amount you withdraw. Yes, but there’s a 25% charge if the money isn’t for an eligible property purchase. After your 60th birthday, you can withdraw money penalty-free.

 

The above relates to the 2018/19 tax year (from 6 April 2018) and does not constitute financial advice.

The Help to Buy ISA may be better for you if… you’re planning to buy a house in the next few years and have a short-term goal to save up for this.
> > More information about the Lifetime ISA

However you decide to save up for your first home, we can help you with your property search when you’re ready to start looking. Contact us to find out about property for sale in the Urmston, Stretford, Eccles or Monton areas.

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