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Mr A

What is a Help to Buy ISA?

A Help to Buy ISA (Individual Savings Account) is a government-backed scheme aimed at helping first-time buyers save for a deposit on a property in the United Kingdom. It was introduced in December 2015 and offered taxpayers who are UK residents and first-time buyers the opportunity to save tax-free with a bonus from the government. For every £200 saved, the government would add a bonus of £50, up to a maximum of £3000.

Although the Help to Buy ISA scheme was closed to new accounts on 30th November 2019, existing account holders can continue to save and earn the government bonus until 30th November 2029.

Reasons to Close a Help to Buy ISA

There are several reasons why you might consider closing your Help to Buy ISA, and this guide will help you navigate the process. Some common reasons include:

1. Buying a property

The main purpose of a Help to Buy ISA is to help you save for a deposit to buy your first property. Once you've found the perfect home and are ready to proceed with the purchase, it's time to withdraw the funds and claim the government bonus.

2. Transferring to a Lifetime ISA

You may decide to transfer your Help to Buy ISA funds to a Lifetime ISA (LISA) if you believe the Lifetime ISA offers better benefits for your circumstances. This could be because the LISA has a higher maximum government bonus and allows you to save more each year.

3. No longer eligible for a bonus

Your circumstances might change, and you may no longer qualify for the government bonus. In such cases, you might decide to close your Help to Buy ISA and use the funds for other purposes.

4. Need the funds for something else

You may need the money saved in your Help to Buy ISA for other financial priorities, such as paying for education or starting a business.

How to Close Your Help to Buy ISA

The closure process for your Help to Buy ISA depends on the reason for closing it.

Closing for property purchase

Step 1: Notify your ISA provider
When you've found a property you want to buy, and you're sure you want to use the funds from your Help to Buy ISA, contact your ISA provider to inform them of your intentions. They will provide guidance on the next steps to take.

Step 2: Get your Closing Statement
Your ISA provider will issue a Closing Statement, which details your account balance and is required by the solicitor or conveyancer dealing with your property purchase to claim the government bonus. The Closing Statement will also confirm that the account has been closed.

Step 3: Share the Closing Statement with your solicitor or conveyancer
Give the Closing Statement to your solicitor or conveyancer, who will then apply for the government bonus on your behalf. Remember, the bonus can only be used towards the purchase price and not for other expenses such as legal fees, broker fees, or mortgage deposits.

Step 4: Receive the government bonus
If the application is successful, the government bonus will be added to the purchase transaction, typically within 15 working days.

Transferring to a Lifetime ISA

If you've decided to move your savings to a Lifetime ISA, you can transfer the existing savings without affecting your ISA allowance for the current tax year, provided the transfer is completed within 30 days of closing your Help to Buy ISA. To initiate this process, follow the steps below:

Step 1: Open a Lifetime ISA
You will need to open a Lifetime ISA with a qualifying provider before conducting the transfer.

Step 2: Contact your Help to Buy ISA provider
Notify your Help to Buy ISA provider of your intention to transfer funds to a Lifetime ISA. They may require you to complete a transfer form and provide them with details of your LISA provider.

initiate the transfer process
Your current provider will now close your Help to Buy ISA and send the funds directly to your Lifetime ISA provider.

Step 4: Inform LISA provider
Once the funds have been transferred to your Lifetime ISA, your LISA provider will deposit the bonus into your account, typically within 4-9 weeks.

Closing due to other reasons

For any other reason, withdrawing all the funds from your account, and contacting your ISA provider to request closure should suffice. However, remember that in these cases, you will not receive the government bonus.

Important Points to Consider

  • The government bonus is only applicable if the property you buy is in the UK, has a purchase price of up to £250,000 (£450,000 in London), and is purchased with a mortgage.
  • If you're using savings from both a Help to Buy ISA and a Lifetime ISA, you will only be able to claim the government bonus from one of them.
  • Ensure you have saved for at least three months before claiming your bonus, as you need to have a minimum of £1,600 saved to qualify.
  • If you wish to transfer your account from one Help to Buy ISA provider to another, contact both providers for guidance on the transfer process.
  • You can withdraw the government bonus only after you've exchanged contracts and just before completing the purchase.

In conclusion, closing a Help to Buy ISA can be a straightforward process if you understand the steps and requirements involved. Keep in mind the reasons for closure, the associated timelines, and the documents you'll need to complete each step smoothly.

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