Saving a deposit for your first place can be an uphill battle. Savings accounts with low interest rates and taxable returns certainly don’t help.
That’s why ISAs can be really useful. Their rates might have seen better days, but at least the interest you earn can’t be touched by the taxman.
If you haven’t yet used your ISA allowance for the year, the countdown to April 5 is on. Here’s why that date is so important… Know your limits
The ‘tax year’ runs from April 6 each year until April 5 the following year. In each tax year we all get various ‘allowances’. One of them is a limit on how much we can put into an ISA. Here’s how your ISA allowances break down:
- £20,000 is your annual limit across all types of ISA. Anything above this is taxable.
- You can’t split your £20,000 among several of the same ISA types (e.g. multiple cash ISAs)
- You can save £2,400 a year in a Help to Buy ISA (or £3,400 in your first year) and the government will chip in an extra 25% of whatever you squirrel away.
- Lifetime ISAs (LISAs) let you save £4,000 a year. In return, the government will give you up to £1,000 a year for a maximum of 33 years.
You have until April 5 to use your ISA allowance for this year. On April 6 your 2018/19 allowance kicks in. So, if you haven’t used it all yet, there are just days left to take advantage of ISA tax benefits.
Save your deposit sooner
The average first-time buyer’s deposit is £33,000*, which a massive amount to save. The fact that you can earn tax-free interest makes ISAs a no-brainer – especially the newer types that are designed to help people save for their first home.
If you’re putting money away anyway, perhaps in a regular saver account, you might want to add getting an ISA to your to-do list.
If you’re already well on your way with your deposit and want to get an idea of how much you could borrow, we can help. Our mortgage calculator will tell you, based on your deposit and income how much we think you could borrow and what your monthly repayments could look like.
*Halifax First Time Buyer Review 2017