HMRC has published some updated guidance on the Help to Buy: ISA. The guidance clarifies the way the government bonus is calculated. First time home buyers need to apply for their bonus (and purchase a home) within 12 months of closing a Help to Buy: ISA account. There are special rules that allow the money to be re-deposited in a Help to Buy: ISA if the house purchase did not complete.

The Help to Buy: ISA scheme launched on 1 December 2015. The scheme allows savers to claim a government bonus of 25% on monthly savings of up to £200 on savings towards their first home. The bonus translates to an extra £50 added to every £200 saved up to a maximum governmental contribution of £3,000 on £12,000 worth of savings. The scheme is now widely offered on the high street.

Savers can make an initial deposit of £1,200 (the monthly maximum plus an extra £1,000). The bonus is only payable on the purchase of a first home. The scheme is limited to one per person (not one per home) so two people buying a home together can both receive a bonus. The bonus is available on home purchases of up to £450,000 in London and £250,000 outside London and can only be claimed against the deposit for a new home. It cannot be used to pay solicitors, estate agents or any other costs associated with buying a home.

For basic rate taxpayers, the scheme offers the equivalent to saving completely free of tax for their first home and savers aged as young as 16 can benefit from the scheme. New accounts can be opened for four years from the launch of the scheme. Once opened, there is no limit on how long an account can be held.