Archived article
Please note that tax, investment, pension and ISA rules can change and the information and any views contained in this article may now be inaccurate.
Hopeful first-time buyers only have a month left before one savings route is shut off to them forever.
The Help to Buy ISA will close to newcomers on 30 November, meaning that anyone who wants to open a new account needs to do so by then. If you’ve already got a Help to Buy ISA open you can keep paying into it and have more than a decade until you need to claim your bonus – the deadline is 1 December 2030.
The Help to Buy ISA has been replaced by the Lifetime ISA, which still gives a Government bonus but on a larger sum each year.
But how to you know whether the Help to Buy ISA or Lifetime ISA is right for you? It depends on your circumstances but as a quick guide:
Which gives more free money?
The 25% Government bonus on the Help to Buy ISA is limited to the first £12,000 saved – so a maximum of £3,000, while for the Lifetime ISA you can get up to £32,000 in Government money.
Which can you save more into?
You can save up to £4,000 a year into the Lifetime ISA, compared to £200 a month for the Help to Buy ISA, plus £1,200 in the first month.
Which can you use to buy a home in the next 12 months?
Only the Help to Buy ISA – you must have the Lifetime ISA open for 12 months before you can use the money.
Which has higher cash rates?
The Help to Buy ISA, where the top rate is 2.58%, compared to the top Lifetime ISA cash rate of 1.4% from Moneybox.
Source: Moneyfacts. Correct as of 01/11/19. Only includes Help to Buy ISAs which are available nationally.
Which allows you to invest?
Only the Lifetime ISA, where you can have cash or investments. You can only hold your Help to Buy ISA in cash.
Which has the highest limit on property value?
The Lifetime ISA has a limit of £450,000 across the UK, while the Help to Buy ISA has a £450,000 limit in London and up to £250,000 outside London.
When can you use the bonus for each?
The Help to Buy ISA Government bonus is only issued after you have exchanged on a property. The Lifetime ISA bonus is paid monthly.
What can I use if I’m over 40?
Only the Help to Buy ISA. If you are 40 years or older and have not yet opened a Lifetime ISA, you have missed the boat.
Which can I get my money out of easily?
The Help to Buy ISA allows you to withdraw money any time; on the Lifetime ISA you’ll pay an exit fee to access your money for anything other than a first home or retirement.
These articles are for information purposes only and are not a personal recommendation or advice. A Lifetime ISA is not for everyone. If you withdraw money before age 60, other than to purchase your first home, you will pay a government withdrawal charge of 25%. This may mean you get back less from your LISA than you paid in. Also, if you choose to save in a Lifetime ISA instead of enrolling in, or contributing to, your workplace pension scheme you will miss out on the benefit of your employer’s contributions to that scheme and your current and future entitlement to means tested benefits may be affected.
Written by:
Laura Suter
Laura Suter is head of personal finance at AJ Bell. She is a multi-award winning former financial journalist, having specialised in investments. Laura joined AJ Bell from the Daily Telegraph, where she was investment editor. She has previously worked for adviser publications Money Marketing and Money Management, and has worked for an investment publication in New York. She has a degree in Journalism Studies from University of Sheffield.