Help to Buy ISA guide

masonic

idlebantam said:

Yorkshire Building Society today told me that I cannot pay the 200 per month in to my sons help to buy isa. They claim its a government rule and only my son can pay in to it. However I've read through all the gov.uk rules and I cannot find existence of this particular rule. Are they correct or are they trying to cover up an error on their behalf? They have refunded every 200 payment back to my bank account since last November. Please help?

"Cash subscriptions from third parties can be accepted without question unless the ISA manager holds information that shows that the cash does not belong to the investor."

https://www.gov.uk/guidance/manage-isa-subscriptions-for-your-investors#cash-subscriptions

but...

"6. Operating Help to Buy: ISAs

6.1 Maximum First Month Amount and Monthly Allowance

(A) A Help to Buy: ISA Holder shall be entitled to pay in aggregate up to the Maximum First Month Amount into their Help to Buy: ISA in the first month in which they pay any amounts into their Help to Buy: ISA. For the avoidance of doubt, a Help to Buy: ISA Holder shall not be entitled to pay a further Maximum First Month Amount into a Help to Buy: ISA following a Help to Buy: ISA Transfer.

(B) A Help to Buy: ISA Holder shall be entitled to pay in aggregate up to the Monthly Allowance into their Help to Buy: ISA in each month following the first month in which they pay amounts into their Help to Buy: ISA."

https://www.helptobuy.gov.uk/documents/2015/12/scheme-rules.pdf/

kenyonsj

Previously, I asked about HTB ISA and having no mortgage. I didn't realise that my daughter actually has a LISA not a HTB ISA. If we give her a loan to buy a flat for cash, will she incur the 25% penalty as there is no mortgage or can the loan we give her be counted? Thanks. 

masonic

kenyonsj said:

Previously, I asked about HTB ISA and having no mortgage. I didn't realise that my daughter actually has a LISA not a HTB ISA. If we give her a loan to buy a flat for cash, will she incur the 25% penalty as there is no mortgage or can the loan we give her be counted? Thanks. 

Yes, if she has a LISA and buys without a mortgage, then she'll pay the 25% penalty on any money she withdraws from the LISA. The net effect of this will be a ~6% loss of the money she paid in.

If you want to look into becoming a mortgage lender for the purposes of getting around the LISA penalty, then you may find the cost of the legal advice you will need, as well as making sure you are compliant or exempt from relevant FCA regulations, plus the cost of registering a legal charge on the property, could outweigh any saving you will make. You will also each need a conveyancer who is on board with this unusual transaction, which you may struggle to find.

Why not just let her take out a small mortgage or use the LISA for retirement?

Leigh0810

I have a H2B and aware I can only deposit 200 each month. For the remainder of my savings, where can i put this? Ive been keeping in my current account (which doesnt pay any interest) while i try weigh up the best options. Can i put it in the H2B anyway to benefit from the interest rate at least, obivously aware it would not go towards the 25% bonus. Or what about another current account with an interst rate? Ive seen TSB advertise recently a 3% rate.

Thanks

Leigh

oli356

Leigh0810 said:

I have a H2B and aware I can only deposit 200 each month. For the remainder of my savings, where can i put this? Ive been keeping in my current account (which doesnt pay any interest) while i try weigh up the best options. Can i put it in the H2B anyway to benefit from the interest rate at least, obivously aware it would not go towards the 25% bonus. Or what about another current account with an interst rate? Ive seen TSB advertise recently a 3% rate.

Thanks

Leigh

Depends how much savings you have left / do you have a lot saved already and want to put it in one place, or just starting to save now so will have extra per month you want to put away.
You could look at regular savers which take  £200-500 (max) a month (https://www.moneysavingexpert.com/savings/best-regular-savings-accounts/) ranging from 2 - 2.75% interest. 
As for normal current accounts - Nationwide will pay 5% on up to £2500 for 1 year, TSB is dropping to 1.5% for up to £1500 (https://www.moneysavingexpert.com/banking/compare-best-bank-accounts/) 

Leigh0810

Ive just startd saving and have around 2k extra but I will have extra to save each month on top of the H2B 200 i put away, on average an additioanl 1k (trying to save hard and fast so in a position to by early next year).

cartwright_g

My son opened a Help to buy ISA after being gifted money from his Gran, however he had already paid into an existing cash ISA this tax year and was unaware of the rules, he was only 17 years of age, the amounts are well below the limits, however his bank(Halifax) have just transferred all the monies for this tax year to his normal cash ISA, I know the HMRC would not have insisted on this course of action as would see it was unintentional and well below the limits, they would have likely sent a letter warning him not to do it again etc.  Halifax not being much help via webchat and helpline clearly very busy at moment, is there anything we can do to get this reversed as he can no longer make a one off payment of £1000 to the account come the new tax year but only the £200 monthly, or is it just a case of live and learn and start again, thankfully it does not look like they closed the HTB ISA so can still add to it from the 6th April?

masonic

cartwright_g said:

My son opened a Help to buy ISA after being gifted money from his Gran, however he had already paid into an existing cash ISA this tax year and was unaware of the rules, he was only 17 years of age, the amounts are well below the limits, however his bank(Halifax) have just transferred all the monies for this tax year to his normal cash ISA, I know the HMRC would not have insisted on this course of action as would see it was unintentional and well below the limits, they would have likely sent a letter warning him not to do it again etc.  Halifax not being much help via webchat and helpline clearly very busy at moment, is there anything we can do to get this reversed as he can no longer make a one off payment of £1000 to the account come the new tax year but only the £200 monthly, or is it just a case of live and learn and start again, thankfully it does not look like they closed the HTB ISA so can still add to it from the 6th April?

HMRC requires all ISA managers to prevent people from breaking the ISA rules for accounts they manage. That means if someone pays more than £20k into a single cash ISA the payment(s) that take them over the limit must be rejected, or if someone subscribes to a second cash ISA with the same ISA manager, those subscriptions must be rejected. HMRC would not get involved in such a situation because the ISA manager can clearly see the problem and sort it out.

He should be able to contribute the full £1,200 after the end of this tax year. He he can do this by withdrawing £1,000 from his existing cash ISA if he doesn't have another £1,000 to add. He should confirm with Halifax they will permit this in advance of making the payment. Their automated systems might reject the payment and need to be worked around.

masstca

If I contribute to my H2B ISA for 3 years (adding 200 £/month as per rules), does it mean that in this time I can neither open any other Cash Isa product nor contribute to existing Cash ISA products I already own?
I understand that the H2B ISA counts as a Cash ISA but, if my understanding is correct, instead of saving 20000£/year tax free, I would be able to save 2400£/year tax free only.... it sounds like a big restriction, maybe I am misunderstanding it

eskbanker

masstca said:

If I contribute to my H2B ISA for 3 years (adding 200 £/month as per rules), does it mean that in this time I can neither open any other Cash Isa product nor contribute to existing Cash ISA products I already own?
I understand that the H2B ISA counts as a Cash ISA but, if my understanding is correct, instead of saving 20000£/year tax free, I would be able to save 2400£/year tax free only.... it sounds like a big restriction, maybe I am misunderstanding it

You're largely correct, but there are a couple of additional factors worth considering:

1. Other types of ISA are available, that you can fund in parallel, such as stocks & shares, lifetime or innovative finance.
2. If you want to save more in cash ISAs, there are some providers who lump multiple cash ISAs together as if they were one, allowing funding of a HTB and a non-HTB cash ISA concurrently, typically referred to as 'split ISAs': https://www.moneysavingexpert.com/savings/best-cash-isa/#accordion-content-0334234523-3