Budget 2015 Help to Buy ISA

Budget 2015 Help to Buy ISA.

In a surprise move, Chancellor George Osborne announced a new type of ISA called the' Help to Buy ISA'.

The Help to Buy ISA is designed to help people who are saving towards their first property i.e.  first time buyers by offering effectively basic rate tax relief on ISA contributions.

For every £200 saved by a prospective first-time buyer the government will add an additional £50.  They are marketing this is a 25% bonus on your savings and this will work in a similar way to personal contributions to a private pension scheme where the bonus/tax relief is offered at source.

The numbers:

• Invest £200 plus £50 bonus equals £250 saved
• maximum investment £12,000 = maximum bonus £3000 = £15,000 in total per person.  This means a couple could save £24,000 as a deposit towards their first home and the government will give them a bonus of a further £6000, meaning a total deposit of £30,000.
• Savings must be on a regular basis although an initial lump sum of £1000 can be paid in at the start in addition to your regular savings.

This is good news for first-time buyers struggling to save towards a deposit for a property although the cynics amongst us may think this goes against all government rhetoric where they are supposedly trying to take the heat out of the property market yet are now stimulating it with bonuses to encourage people to save for properties at the lower end which in turn has a knock-on effect of driving property prices up in the middle and higher end.  Who stands to benefit from this? The government! With the Help to Buy scheme already in place the government stand to profit considerably where they have lent money via the Help to Buy scheme up to 20% of the deposit and thereby owning a 20% share of a property that is being bought via the Help to Buy scheme.

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