help to buy ISA

cider123

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You may also find our fully researched Help to buy ISA guide helpful.

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Hi All,

I'm an absolute beginner with money and would like to start saving, in general, and also a deposit on a house.

I've been reading all around forums/internet etc about ISA's and I understand that I am allowed to save up to £15,000 per year in ISA's. From what I understand once the tax year has past (5th April?) you can't add anymore money to the ISA from that year and would start a new allowance.

However, looking at everything to do with the Help to Buy ISA, it's designed so that you put £200 per month in over 4 years to get the full benefit. How can this be if you're not supposed to add to previous years ISA'a?

In addition, if you have a Help to Buy ISA which you can only put £200 per month into (being £2400 per year) can I also have a regular ISA that I'm putting £15,000 into?

And if that all makes sense, should I be making a point of opening my Help to Buy ISA before this April??

I hope someone can shed some light onto this for me,

much appreciated

MARTYM8`

Lots of questions there.

Obviously the sooner you open a help to buy isa given the limits the sooner you build up your balance and thus eligibility for the 25% bonus when you buy a property. So no need to wait until April.

You can invest in a cash isa and help to buy isa in the same year but only with certain providers i.e. Nationwide, Aldermore, RBS/Natwest and Newcastle BS who offer split isa umbrellas.

But unless you are a higher rate taxpayer - and even then its questionable given the low rates on offer - there is not much benefit from holding an ordinary cash isa given the £1k tax free interest available on savings from April.

You may find you get better rates via current accounts (e.g. TSB current account plus/Nationwide flex direct paying 5% plus others like Tesco paying 3%) or regular savers. Also look out for cashback (e.g. Nationwide refer a friend and switch incentives) to boost your cash.

So prioritise the help to buy isa - Halifax pays 4%, Virgin 3% but most others pay 2% (to as little as 0.7% with Clydesdale). Then look at current accounts/regular savers and only then cash isas as the rates are mostly very poor.

cider123

HI Marty,

Thanks for that. I think I had better buy a basic economics text book, GCSE perhaps! I realise I don't understand even the basics.

So, from what you're saying, do I take it to mean that a person can gain £1000 in savings interest before they pay any tax on that interest? And what difference does it make if you're a high tax payer?

So, just thinking allowed, if a good account earns 5% interest, then to gain more than £1000 a year I'd have to have more than £20,000 in that account. And from what you're saying an ISA has a much smaller return so getting near the tax limit isn't an issue anyway, is that right?

thanks again

AlanP_2

you have got it, a BR taxpayer can earn £1000 in interest tax free from the start of the new tax year in April.

A HR taxpayer is limited to £500 of tax free interest.

Interest paid on cash savings inside an ISA is tax free and has nothing to do with the above limits from April 2016.

Over the last few years cash outside an ISA and in current / regular savers paying 4-6% has beaten Cash ISA rates (<1% at the moment I think) even after paying tax let alone with £500 / 1000 tax free.

A HTB ISA with a bonus when you buy a house is a good deal and the Halifax one paying 4% is the best of the bunch on offer.

Eco_Miser

cider123 wrote: »

I've been reading all around forums/internet etc about ISA's and I understand that I am allowed to save up to £15,000 per year in ISA's. From what I understand once the tax year has past (5th April?) you can't add anymore money to the ISA from that year and would start a new allowance.

You, and many other people, are confusing the tax wrapper with the bank account. You can put a little more than £15k into an ISA each year, and start a new wrapper (allowance) each year, but normally you can put successive year's allowances into the same ISA bank account.

However, all this becomes irrelevant when you can put £20k into a current account, get £1000 interest and not pay any tax on it. (Actually you'd need to spread it between 3 or 4 accounts.) You'd need way more in ISAs to get £1000 tax-free interest. HTB is a special case because of the government bonus.

Here's a list of high-paying current and regular saver accounts

cider123

Hi All,

Thanks for the advice. Im beginning to see that I should get the halifax HTB ISA and then one of the higher interest savings accounts.

Why does it seem that everyone's so obsessed with ISA's if they're really not great? And is the return any better form investment ISA rather than cash.

Out of interest, why do you say to spread it between 3 or 4 accounts?

This may seem a silly question, but where do rich people put their money???

thanks in advance

Eco_Miser

ISAs used to be great. A lot of people still haven't noticed the change.

3 or 4 accounts because the high rates are promotions, only available on fairly small amounts (see the list linked above).


Read some of the investment threads on here and you may find out Stocks, funds, property, land, their own businesses, other people's businesses (Dragon's Den style), fast cars, big yachts.

Topsy31

Can I transfer £12K from an existing ISA into the 'help to buy' ISA and even if I don't add to it every month, still qualify for the £3K bonus??

WorriedFTB_2

Unfortunately not . The maximum that you are allowed to put is £1200 on the first month , then £200 each month . There must be gradual evidence of the build up ...
We opened 2

jimjames

cider123 wrote: »

Why does it seem that everyone's so obsessed with ISA's if they're really not great? And is the return any better form investment ISA rather than cash.

This may seem a silly question, but where do rich people put their money???

thanks in advance

Rich people tend to use investments rather than cash. If you look at the ISA stats, those doing S&S ISAs are generally those with higher incomes and filling them each year.


Investment returns aren't guaranteed but long term should beat cash. That's the problem though - it's long term so not suitable for money you'll need short term and may need to access when the markets have dropped a bit.