Compare the Help to Buy: ISA with the Lifetime ISA

Saving for a first home can seem like a long slog in front of you but there are ways that you can reach your savings goal quicker with the help of Government bonus funded ISAs. Both the Help to Buy: ISA and the Lifetime ISA are Government initiatives to help savers reach the target of their first home sooner by awarding them with a bonus of 25% on top of their savings in addition to any interest which is accrued. 

You can no longer open Help to Buy: ISA accounts as of the 30th November 2019 but all of the information in this comparison is still correct and if you already have an account, you can still save into it and use it as normal. 

Although the bonus paid by the Government is the same, the accounts have different features (including when the bonus is paid) and will be right for different circumstances so we have compared them for you below. Which account is more beneficial for you will depend on how much you can save and when you are planning to buy your home amongst other considerations. Both accounts contribute to your annual ISA allowance of £20,000. Find out more below. 

What is a Help to Buy: ISA? 

What is a Lifetime ISA?

What is a first-time buyer?

Which should I choose if I want to buy a property quickly?

What if I am a first-time buyer over 40 years old?

Can I use both a Help to Buy: ISA and Lifetime ISA to buy my first home?

Help to Buy: ISA vs Lifetime ISA comparison table

What is a Help to Buy: ISA?

A Help to Buy: ISA is a savings account specifically designed to help first time buyers over the age of 16 get on the property ladder quicker by boosting their savings with a 25% Government bonus on a maximum balance of £12,000, therefore the maximum bonus is £3,000 and is payable after the house purchase has completed. You cannot use these savings to pay for your exchange deposit. 

The Help to Buy: ISA closed on 30th November 2019. If you already have an account you can save into it until 30th November 2029 and claim your bonus as long as it is used by 30th November 2030. 

What is a Lifetime ISA?

A Lifetime ISA is another product that gives savers a 25% Government bonus. Savers aged 18-39 can open a LISA and deposit up to £4,000 a year which means the maximum bonus payable is £1,000 a year. Savers can keep adding to their savings until they are 50 years old, so those opening the account at age 18 could save a maximum of £128,000 and receive a bonus of £32,000. The Lifetime ISA can also be used to save for retirement where the customer can save and receive the bonus until they are 50 but cannot withdraw the funds until they are 60. The customer will receive interest on their savings between 50 and 60 years old. HMRC will calculate the Government bonus based on the contributions you have made each month and pay each Government bonus within 4-9 weeks. Find out more about Lifetime ISA below or read our FAQs.

What is a first-time buyer?

To benefit from either of these ISAs you have to be a first time buyer according to the following definition: 

A first-time buyer is someone who has never owned a property before, including a home outside of the UK. If you've inherited a property, or owned a share of one, you will not be classed as a first-time buyer.

If you have inherited a property, you will still be able to open a Lifetime ISA to save for retirement if you are between 18-39, however you will not be able to access your savings without a 20-25% withdrawal fee until you are 60. Find out more about the Lifetime ISA.

Which should I choose if I want to buy a property quickly?

If you are wanting to buy a house within a year and you already have a Help to Buy: ISA, this will be possible. If you want to buy a house within a year from starting saving then you won't be able to do this  without fee with the Lifetime ISA as it must be open for a year before using the savings and gaining the bonus. You could use the savings but, you will be charged a 20-25% withdrawal fee if you withdraw from your Lifetime ISA, even if for your first home, before the account has been open for 12 months. 

You need at least £1,600 to receive a bonus from Help to Buy: ISA. In this case, you would receive a £400 bonus. 

What if I am a first-time buyer over 40 years old?

You cannot open a Lifetime ISA if you are over the age of 39. 

Can I use both a Help to Buy: ISA and Lifetime ISA to buy my first home?

You can hold both accounts, if you opened a Help to Buy: ISA before the 30th November 2019, but you will only be able to use the bonus from one of them for the purchase of your first home. You cannot use the Help to Buy: ISA bonus for your exchange deposit.

Savings scenario 1 - £200 a month

Lifetime ISA
This table shows the scenario if Tuck had a Lifetime ISA for three years and solidly saved £200 a month. He would only be able to use his Lifetime ISA bonus after his account had been opened for 12 months and if he was using it for his first home or when he was 60 if he wanted to save for retirement. 

 Year Savings after full year Bonus Savings + bonus Interest (1.25%) Total savings
1 £2,400 £600 £3,000 £20.31 £3,020.31
2 £5,420.31 £600 £6,020.31 £58.07 £6,078.38
3 £8,478.38 £600 £9,078.38 £96.29 £9,174.67

Help to Buy: ISA
This table show the same scenario of savings, £200 a month for three years; but it is for the Help to Buy: ISA. The Help to Buy: ISA bonus is only available once the account has £1,600 in it and the bonus is payable once the account has been closed and the house purchase is completed. 

Year   Savings after full year Interest (2.25%) Total savings Bonus (payable after completion) Savings + bonus
1  £2,400 £29.25 £2,429.25 £607.31  £3,036.56
 2  £4,829.25 £83.91 £4,913.16 £1,228.29 £6,141.45
3 £7,313.16 £139.80 £7,452.96 £1,863.24 £9,316.20

These tables are based on the assumption that all deposits and bonus are received on the 1st of the month. These tables are also based on the assumption that the saver opened a Help to Buy: ISA account before they were closed to new applications from 30th November 2019. 

Remember, Tuck would only be able to use the bonus from one of his accounts. 

Reckon you can save more? Small saving swaps can really add up quickly. We’ve analysed six of the most common ones from meal deals to coffee habits over on our Saver’s Nation hub. Find out where you could shave off those extra pennies to pop into your house deposit savings. 

Savings scenario 2: Maximum savings

In this scenario we are comparing the savings that Marian would have if she saved the maximum amounts into a Help to Buy: ISA versus a Lifetime ISA for two years. These tables are based on the assumption that all deposits are received on the 1st of the month.

Lifetime ISA
Marian would be able to earn a higher bonus with her Lifetime ISA if she was able to deposit more. To save the maximum £4,000 a year into her Lifetime ISA this is broken down to roughly £333.33 a month - she would also gain her £1,000 Government bonus. 

The table below is an assumption that she would deposit £4,000 into her account in a lump sum.

 Year Savings at start
of the year
Amount saved Bonus Total  Interest (1.25%) Final savings
1 £0 £4,000 £1,000 £5,000 £62.50 £5,062.50
2 £5,062.50 £4,000 £1,000 £10,062.50 £125.78 £10,188.28

Help to Buy: ISA
To save the maximum in the first year of saving in her Help to Buy: ISA she would have to save £1,200 in the first month and then a subsequent £200 a month for the last 11 months of the year leaving her with £3,451.75 in savings and a 25% Government bonus of £862.94 payable after completion on the property. Plus, in her second year of saving she would only be able to deposit £200 a month. 

 Year Savings at start
of the year
Amount saved Interest (2.25%) Total savings Bonus claimable
after completion
1 £0 £3,400 £51.75 £3,451.75 £862.94
2 £3,451.75 £2,400 £106.91 £5,958.66 £1,489.67

Remember, Marian would only be able to use the bonus from one of her accounts. 

Help to Buy: ISA vs Lifetime ISA comparison table

Help to Buy: ISA Lifetime ISA
Who can hold an account? UK residents aged 16+ and anyone who opened an account before the closure on 30th November 2019. You cannot open an account after this date. 
UK residents between 18 and 39 years old
Can I open as a joint account?
No. If you are buying your first home with another first-time buyer you may both claim the bonus from your savings. 
No. If you are buying your first home with another first-time buyer you may both claim the bonus from your savings. 
Where can I apply?
N/A - This account is no longer taking new applicants. Branch and online
What can I use the account for?
 Purchase of first home Purchase of a first home and then can be kept open to save for retirement with the same bonus. Account can be opened purely for retirement if the customer is already a homeowner.
How much do I need in order to open an account?
£1. You can pay in up to £1,200 within the first month of opening the account and then a maximum of £200 a month thereafter.  £10. You can pay in up to £4,000 per tax year
How much can I save each year?
£2,400 a year. Maximum of £3,400 in the first year due to the initial first month's allowance of £1,200  £4,000 a year
Can I deposit lump sums?
 No. Monthly savings only
Tax status Tax-free Tax-free
When is the account available until?
 30th November 2019
The foreseeable future 
What is the maximum value of the property I can buy?
£450,000 - London 
£250,000 - rest of the UK 
When can I use my ISA to buy my home?
Once you have over £1,600 saved, which is achievable after three months. You have until 1st December 2030 to use your Help to Buy: ISA savings and claim your bonus.  After the account has been opened for 12 months 
Can I use the bonus for my first home exchange deposit?
No. The Help to Buy: ISA bonus only helps with the mortgage deposit as it is released after completion Yes. You can withdraw from your Lifetime ISA including your bonus to use for your exchange deposit but the property must complete within 90 days of your conveyancer receiving the funds from your Lifetime ISA. Your solicitor will act for you in the purchase and the ISA provider will pay the funds directly to them. Read about how to get the funds out of your Lifetime ISA
How much bonus can I earn?
25% Government bonus on the full amount saved in the account, up to £3,000 25% Government bonus on savings. Maximum bonus of £1,000 per year. Potential maximum bonus over time is £32,000. 
When do I get the 25% bonus?
The bonus isn't available until after the house sale is completed and is arranged on your behalf by your solicitor.  The bonus is payable into your account each time a deposit is made i.e. if £4,000 was deposited, a £1,000 bonus would be collected for you. 
 Maximum savings Bonus is only payable on the first £12,000 of savings. There is no maximum saving amount.   £128,000. This equates to 32 years of £4,000 saving a year.  
What is the interest rate on savings with The Nottingham?   2.25% tax-free p.a./AER paid annually

Interest is only paid on your balance not the bonus.
1.25% tax-free p.a./AER paid annually 

Compound interest earned is on the bonus as well as savings.
Can I withdraw for another reason if I change my mind?
Yes but you won't receive the bonus. You will still have your savings and interest earned
Yes but only for retirement at age 60. Otherwise a 20-25% fee will be charged on the total balance of the withdrawal meaning that you could get back less than you put in 
Is there a notice period for withdrawals?
No No but the account must be open 12 months before withdrawing without incurring a 20-25% fee
Is there a charge for withdrawals?
 No, you can make as many withdrawals as you like, providing you keep at least £1 in your account at all times. If you withdraw any funds after depositing them this will still count towards your allowance. For example, if you deposited £150 and withdrew £100 you would still only be able to put £50 in that month
There is a 20-25% withdrawal charge on the total value of the account if withdrawing for a reason other than a first house purchase or retirement (over the age of 60). Otherwise there is no withdrawal charge for the Lifetime ISA
Other restrictions
You can only pay in £200 a month after the initial month of £1,200.
You cannot pay into the account after the age of 50 

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