In this brief guide we are going to discuss the help to save scheme, how you can pay money into it, how the bonus system works, what happens after the 4year term ends, if it affects your eligibility for other benefits and a few examples

What is the help to save scheme?

The help to save scheme is a government scheme which is targeted at low-income people. It allows you to save in the help to save account if you are entitled to working tax credits receive universal credit. You get a bonus of 50p for every £1 you save over a period of 4 years. You can receive a government bonus of £1200 over four years.

The help to save account is provided by the government so there is very little risk of you losing your money.

You can apply for the help to save scheme here

You will need a Government Gateway user ID, your national insurance number and your government gateway password to apply. If you do not have a user ID, you can create one when you apply. You will also need to have your UK bank details on hand when you apply.

Your eligibility will be assessed by HM Revenue & Customs (HMRC) through the Government Gateway and you will not need to submit any documents.

Your Help to Save account will be held with National Savings & Investments (NS&I).

You have up to five years from September 2018 to apply for an account.

How the Help to save works

Help to save works by allowing you to save between £1 and £50 each month. There is no obligation to put money in each month but if you want to take the full benefits of the help to save scheme then it is advisable to save the maximum £50 each month.

Contributing money

You can pay money into the help to save account by standing order, with a debit card or by doing a faster payments bank transfer. You will not be able to pay money into the help to save account with direct debit.

You do not have to make one payment per month, you can pay in as many times and whenever you can each month but you can only pay the maximum of £50 each month.

This means if you have saved £50 by the first of the month, you will need to wait till the next month before you can make any further contributions to your help to save account.

Payments will normally show up in the account within 24 hours.

There is no penalty if you’re not able to contribute to the account every month, but this will affect the amount of bonus you are able to get over the four year period.

Withdrawing money

You can only withdraw money from your Help to Save account but this can only be  to your bank account. Withdrawing money will not affect your bonus payment.

The government bonus

The government pays you a bonus of 50p for every £1 you save and the maximum you can save each month is £50 so this means you can earn a possible bonus of £25 each month if you save the maximum of £50.

The government will also only allow you to save in the help to save account for a period of 4 years. This means you can save the maximum £50 for 48 months, a total of £2400  and potentially earn £25 for each of those 48 months. This will bring the total government bonus you could get from your help to save account to £1200.

You don’t get the bonus each month but rather you get the bonus at the end of the second and the fourth year. The bonus you’ll get is based on how much you have saved in the preceding months.

The bonus which you get at the end of the second year will be based on the highest balance you had during the first 2 years. The bonus which is paid on the fourth year is the difference between how much yo  have saved at the anniversary the fourth year and the end of the second year.

If your highest balance does not increase within year 3 and 4 from what it was between year 1 and 2 then you will not get your final bonus.

The government bonus is tax-free and does not affect your personal savings allowance.

Your help to save bonus is paid into your bank account, not your Help to Save account.

You can still withdraw your money and be eligible for the government bonus on your help to save account.

Managing your help to save account

Once you have opened your account you can manage it online by visiting Gov.uk or through the HM Revenue and Customs (HMRC) app which you can download for free. The IOS version is here and the android version is here.

You will receive an account number and sort code so you can pay money into the account.

You will also get a welcome pack from HMRC when your help to save account is opened.

What happens to your help to save account after 4 years?

At the end of the 4 year anniversary from when you opened your help to save account, the account will close and you will not be able to reopen it or open another Help to Save account. The money in your help to save account is yours to keep and you can transfer it to your bank account.

Can I close my help to save account?

The help to save account can be closed at any time but if you close your help to save account early you may not receive your government bonus and you will not be able to open a new help to save account.

Example scenarios with the help to save bonus

You pay in £50 every calendar month for 2 years. You do not withdraw any money. Your highest balance will be £1200. Your first bonus is £600, which is 50% of £1200.

In years 3 and 4 you save an extra £800 to grow your highest balance from £1200 to £2000. Your final bonus is £400, which is 50% of £800. Even though you withdrew some money after your balance was £2000, this does not affect your bonus.

What happens if you withdraw money

If you withdraw money it will be harder for you to:

grow your highest balance

earn the largest possible bonuses

Withdrawing money could mean you are not able to earn a final bonus – depending on how much you withdraw and when.

Eligibility for the help to save scheme

To be able to open a help to save account you will need to meet the eligibility requirements.

You will need to be:

receiving Working Tax Credit

entitled to Working Tax Credit and receiving Child Tax Credit

claiming Universal Credit and your household earned £569.22 or more from paid work in your last monthly assessment period

If you get payments as a couple, you and your partner can apply for your own Help to Save accounts. You need to apply separately.

You can continue using your help to save account even if you stop claiming benefits.

Living in the Uk

If you live overseas, you can apply for an account if you’re either a:

Crown servant or their spouse or civil partner

member of the British armed forces or their spouse or civil partner

What happens if you leave the UK?

“If you leave the UK temporarily (generally for no more than 52 weeks), you are able to contribute to your Help-to-Save account as normal for:

the first 8 weeks, if you are claiming tax credits, or

the first month, if you are claiming universal credit.

It is possible to extend this period (to no more than 6 months) if you are a mariner or continental shelf worker, or your absence from the UK is in connection with:

the death of your partner, your child or a close relative,

the treatment for an illness or physical or mental impairment of you, your partner or your child.

The extent to which it is possible to extend the period will depend on your circumstances.

If you continue to be absent from the UK beyond this period, you must inform NS&I and stop making contributions to your Help-to-Save account. Failure to do so may incur a penalty. However, you do not need to close your Help-to-Save account and you will continue to be eligible for the tax-free bonus.” source- ILTR

How does the help to save account  affect your benefits

When saving with the governments help to save scheme there may be some benefits which you may be affected. Your eligibility for certain benefits and how much you get may change.

Universal Credit

According to the Government:

“If you or your partner have £6,000 or less in personal savings this will not affect how much Universal Credit you get. This includes any savings in your Help to Save account.

Your Help to Save bonuses will not affect your Universal Credit payments.

Working Tax Credit

Any savings or bonuses you earn through Help to Save will not affect how much Working Tax Credit you get.

Housing Benefit

If you or your partner have £6,000 or less in personal savings this will not affect how much Housing Benefit you get. This includes any savings in your Help to Save account.

Your Help to Save bonuses will not affect your Housing Benefit payments”

Support for your account

If you have already opened a Help to Save account and have any questions or problems, you can call 0300 322 7093.

Other government schemes you can save with

If you are looking to save for retirement or to get on the property ladder then you may be able to use any of the below government schemes.

Some of the Government schemes you may be able to use include:

  • Lifetime ISA– gives you a government bonus of £1,000 if you save the maximum £4,000 a year.
  • Help to buy ISA– gives a maximum bonus us £3,000 if you save the maximum allowed of £12,000. Before you get either you should consider which is better. Lifetime ISA vs Help to buy ISA.
  • Help to buy equity loan- gives you up to 40% as a 5-year interest-free equity loan. You begin to pay interest at 1.75 % after the fifth year and 1% plus RPI for every year thereafter.
  • Shared ownership- You can buy between 25% to 75% of the property initially with a shared ownership mortgage and then buy more using a staircasing mortgage.
  • Armed forces help to buy- similar to the help to buy equity loan but specific for the armed forces personnel giving them an increased chance of acceptance.
  • Rent to buy- This is the right to buy scheme on which this guide is currently discussing. A different marketing name is just used. Watch out for this when shopping to avoid missing out on eligible properties due to confusion.
  • Right to buy- allows you to buy your home at a discount price.
  • Preserved right to buy- same as above.
  • Right to acquire- same as above.

Depending on where you live, you may also be able to take advantage of home buying schemes provided by your local council. Example: In Norwich, the local councils provide the Norwich home options scheme.

In this brief guide, we discussed the help to save scheme. If you have any questions or comments please let us know.

John Bate

John has 22 years of experience in financial services. This spans across financial research, financial services (As a qualified mortgage broker and underwriter), financial trading and sales at global investment banks. While working as a publishing research analyst, he covered European bank credit and advised institutional clients on investment strategies at both JP Morgan and Societe Generale. John has passed all three levels of the CFA (Chartered Financial Analyst) programme.