Ditched Help to Buy ISA for Savings & Stocks

Switching from Help to Buy ISA to Better Options

Without access to the attractive 25% government bonus, the Help to Buy ISA has become essentially useless for me, according to MoneyWeek contributor Sam Walker.

Sam Walker, an online financial writer, has transitioned his funds from the Help to Buy ISA into regular cash savings accounts and a stocks and shares ISA.

The promise of a generous 25% top-up from the government convinced me to start a Help to Buy ISA back in the late 2010s.

However, now in 2025, I’ve chosen to close that account and redirect my savings to more advantageous alternatives.

Since moving into my partner’s home last year, I’m no longer in the market for a first-time property purchase, rendering the Help to Buy ISA pointless.

Lacking the 25% bonus and providing only a meager 2.5% interest rate, the account was actually eroding my purchasing power in real terms, considering the current CPI inflation rate.

Consequently, I’ve allocated 80% of the funds from the Help to Buy ISA to a taxable cash savings account, while shifting the other 20% into a stocks and shares ISA.

My current cash savings account delivers more than 4% interest, significantly outperforming the Help to Buy ISA’s rate.

The earnings from this cash account remain comfortably within my personal savings allowance for the 2025/26 tax year. Eventually, I plan to move some or all of these funds into a cash ISA to safeguard them from taxation.

The 20% directed to the stocks and shares ISA represents capital I can afford to risk. Being within an ISA wrapper, any gains will be protected from capital gains tax, dividend tax, and income tax.

By reallocating the Help to Buy ISA proceeds to cash savings and a stocks and shares ISA, my money is now positioned to generate superior returns and perform better over the long haul.

I gave thought to establishing a Lifetime ISA, which similarly provides a 25% government bonus and permits investments in stocks and shares.

Nevertheless, that bonus is only available for first-home purchases or withdrawals after age 60. Any other withdrawal incurs a substantial 25% charge.

I sought a tax-advantaged account with greater flexibility, allowing penalty-free access before age 60, which a stocks and shares ISA provides.

Millions Remain Stuck with Help to Buy ISAs

A recent Freedom of Information request by comparison platform Finder revealed that over two million savers continue to hold Help to Buy ISAs.

These individuals will be unable to make further contributions after November 2029, and from November 2030 onward, they won’t qualify for the 25% bonus.

To claim the bonus, the property must cost no more than £250,000 outside London or £450,000 in the capital. These thresholds, unchanged since the scheme’s inception in December 2015, lag far behind the approximately 45% rise in house prices from September 2015 to September 2025, per Land Registry figures.

Sarah Coles, head of personal finance at Hargreaves Lansdown, noted that while the Help to Buy ISA remains valuable for aspiring homeowners, those no longer pursuing property ownership would benefit from alternative placements.

“If circumstances change and home buying is off the table, it just functions as a basic savings account with contribution limits. At a top rate of 3%, it’s hardly competitive, making a cash ISA a smarter choice. For longer-term objectives, consider a stocks and shares ISA.”

Cash ISA Allowance Cuts to Promote Investing

Chancellor Rachel Reeves announced in the Budget that the annual cash ISA allowance for those under 65 will drop from £20,000 to £12,000 starting April 2027, while the total ISA limit stays at £20,000.

This policy aims to encourage savers to embrace investments over safer, lower-yield cash options.

Yet, surveys indicate this shift may not succeed. AJ Bell’s research showed 51% of cash ISA users would opt for taxable savings accounts if the allowance is reduced.

Although stocks and shares ISAs involve higher risk, they typically deliver stronger returns than cash ISAs or taxable savings over extended periods of five years or longer.

AJ Bell’s analysis demonstrates that a £1,000 lump sum in an average North America fund from April 1999—when ISAs launched—would now total £6,285, versus £2,079 in an average cash ISA.

Even UK equity funds, facing market headwinds over two decades, would have turned that £1,000 into £3,787, surpassing both cash and inflation.

Laura Suter, AJ Bell’s director of personal finance, highlighted the “hidden cost of caution.”

“Inflation erodes savings stealthily, and even average cash ISAs fail to match it. Risk-tolerant investors, however, have reaped substantial rewards,” Suter explained.

When considering a stocks and shares ISA, account for potential fees that could diminish returns, such as platform fees (percentage-based or fixed), and trading charges on buys and sells.

Sam Walker is a staff writer with expertise in personal finance, particularly housing, savings, and policy matters. He aims to demystify financial topics for better decision-making.