Didn't use the HTB ISA - what now?

Oszie

Hello,

I had opened a Natwest help to buy ISA last year with the impression that the government bonus could be paid towards the deposit - but now knowing that it can only be used towards the mortgage of the house after exchange I don't see the point. I am a first time buyer and have used the help to buy scheme and expect completion on the new build next week (it has taken 7 months!).

So my question is - now that I will become a home owner, what are the implications of keeping my help to buy ISA? I understand I will not be able to obtain the government bonus in future- but is it possible to leave the money accumulated in this account to earn interest - it has a better interest rate than my old ISA (but that was probably not too great to begin with).

Hope you can help,

Thank you

masonic

Oszie wrote: »

I had opened a Natwest help to buy ISA last year with the impression that the government bonus could be paid towards the deposit - but now knowing that it can only be used towards the mortgage of the house after exchange I don't see the point. I am a first time buyer and have used the help to buy scheme and expect completion on the new build next week (it has taken 7 months!).

It must be used towards the mortgage deposit, so your impression was not totally incorrect. If you also need to pay a deposit at exchange, then it is necessary to negotiate this down or exchange and complete on the same day, but that's a little irrelevant for you now.

So my question is - now that I will become a home owner, what are the implications of keeping my help to buy ISA? I understand I will not be able to obtain the government bonus in future- but is it possible to leave the money accumulated in this account to earn interest - it has a better interest rate than my old ISA (but that was probably not too great to begin with).

You can probably forget about it for the remainder of this tax year since you met the criteria at the start of the tax year. It would probably be unwise to continue to hold it beyond that.

Have you already maxed out any high interest non-ISA accounts that would beat the rate on your HTB ISA after tax?

eskbanker

Why don't you use it now if you haven't completed yet? Assuming you still have time to make it happen, you can reduce the size of your mortgage and get a 25% bonus of free money in doing so, how would you get a better return on your money than that?

masonic

eskbanker wrote: »

Why don't you use it now if you haven't completed yet? Assuming you still have time to make it happen, you can reduce the size of your mortgage and get a 25% bonus of free money in doing so, how would you get a better return on your money than that?

I thought of suggesting the same thing, but if completion is scheduled for next week, there won't be time for the OP to get the closure letter from the bank and have the solicitor apply for the bonus in time.

DragonQ

I still have a Halifax Help to Buy ISA at 3.5% (started at 4%) that I use as a regular saver. I can't get the bonus as I already own a house but that doesn't stop me getting a better interest rate than any other ISA out there. I've taken money out of it several times penalty-free and if the interest rate ever drops to a point where it's not worth having I'll just take it all out and close the account.

masonic

DragonQ wrote: »

I still have a Halifax Help to Buy ISA at 3.5% (started at 4%) that I use as a regular saver. I can't get the bonus as I already own a house but that doesn't stop me getting a better interest rate than any other ISA out there. I've taken money out of it several times penalty-free and if the interest rate ever drops to a point where it's not worth having I'll just take it all out and close the account.

Well I hope HMRC never catches up to you, although presumably the worst they will do is treat the savings income as taxable, which may have no effect if you have enough personal savings allowance remaining.

Oszie

Yes, this is what I was worried about/needed answers for - I don't have any other savings in another ISA and no where near maxing out on any personal allowances. So would it be wrong to leave it in the help to buy ISA with the better interest rate once I become a home owner by the end of this week...

As a first time buyer and the struggle with savings - the hesitation to use it towards the repayment of mortgage was due to the fact that I would still need some savings to buy furniture.. originally thought the ISA and bonus could be used towards the initial deposit - but help to buy rules state min of 5% of the value of the house must be paid so there was no room to negotiate a lower deposit.. so given the low 2 year fixed interest rate and the unknown territory & responsibilities of being a home owner, felt more comfortable having some funds which are accessible in case of emergencies or unforeseen circumstances.

DragonQ

masonic wrote: »

Well I hope HMRC never catches up to you, although presumably the worst they will do is treat the savings income as taxable, which may have no effect if you have enough personal savings allowance remaining.

Why? There's nothing in the terms and conditions of the account that says you have to use the money towards a first house, and it's not my problem that Halifax offers a much better interest rate on their Help to Buy ISA than most/all other ISAs out there. Their T&Cs state that:

When opening a Help to Buy: ISA and starting to save you: ... Must be an Eligible Customer. Amongst other things this means you must not be a Registered Property Owner and must not have previously received a Help to Buy: ISA bonus...

There is no mention of not being able to continue to use the ISA once you are a property owner.


From HMRC's perspective, it'd be ludicrous to say "well now you have to pay tax on it" if you don't use the money to buy your first home. What if you needed the money for some other purpose before buying? What if you bought a house that was over the (stupidly low) £250k limit outside of London so you couldn't get the bonus anyway? Indeed their FAQ says it's fine to do whatever with the money (although it'd be questionable to do so if you hadn't bought your first house yet):

Can I withdraw money from my Help to Buy: ISA?
Yes. You can withdraw money from your Help to Buy: ISA account at any time. But you can’t put all the money you’ve withdrawn straight back into the account – you’re still only able to save up to £200 in every month. For example, if you deposit £200 and then withdraw £50 in the same month, you will have to wait until the next calendar month to make another deposit.

Regardless, I have no other cash ISAs so I'm not breaking the "one cash ISA per year" rule and you're also right that it would fall under my £1000 tax-free savings allowance anyway.

isasmurf

DragonQ wrote: »

Wýhy? There's nothing in the terms and conditions of the account that says you have to use the money towards a first house, and it's not my problem that Halifax offers a much better interest rate on their Help to Buy ISA than most/all other ISAs out there. Their T&Cs state that:

There is no mention of not being able to continue to use the ISA once you are a property owner.

When you open a HTB you sign an eligible customer declaration. As part of this you agree to be bound as an eligible customer by the scheme rules. Each year you are required to be provided with a reminder to check you are still an eligible customer.

By definition you are not an eligible customer if you own a property so you will be in breach of your declaration to continue to hold the HTB.

Rich2808

isasmurf wrote: »

When you open a HTB you sign an eligible customer declaration. As part of this you agree to be bound as an eligible customer by the scheme rules. Each year you are required to be provided with a reminder to check you are still an eligible customer.

By definition you are not an eligible customer if you own a property so you will be in breach of your declaration to continue to hold the HTB.

In reality they are unlikely to find out - as long as your mortgage is with them.

But is it really worth it get 0.5 per cent extra interest on a few grand?

I think HMRC will be more concerned about people wrongly claiming the bonus - although it will often be dwarfed by the stamp duty.

jimjames

DragonQ wrote: »

it's not my problem that Halifax offers a much better interest rate on their Help to Buy ISA than most/all other ISAs out there.

It might offer a better rate than cash ISAs but it's definitely not the best rate available. Not sure why you'd bother to twist the rules to get 3.5% when you can get 5% outside an ISA perfectly legitimately with regular savers and current accounts.