My partner and I are planning to buy our first house in the next 2-3 years.
This month the UK Government has opened up help to buy ISAs which give a 25% bonus on top of what you deposit in up to a max of £3000. The maximum deposit is £1200 in the first month and £200 per month thereafter.
A 25% return on investment (tax free) is clearly much better than any other investment on the market at the moment (unless I want to take a significant amount of risk) so, given that I have no debt and already have an emergency fund built up, it would make sense to save as much as I can into this first before any other investments.
I can easily cover the initial £1200 and £200 a month thereafter from my salary. My partner however, is still a student and could not afford to save into this scheme. However, my salary is enough that I could also comfortably transfer £200 a month to her in order to put into her own 'help to buy ISA' so that when we come to buy a house we will be able to use both of these to combine together on buying the same house.
Are there any potential issues that could arise from doing this? Is it allowed to transfer money to someone solely to take more of an advantage of schemes such as this? I could class the £200 a month as a 'gift' to her, but would it count as taxable income?
I save a significant portion of my salary each month already, and I always see this as saving for our future together rather than saving for myself. So I would not be changing the overall amount of money I save each month or the purpose of what I am putting money aside for.
There are a few obvious issues that I have considered:
- If I lose my job or we have some other financial emergency then we would not be able to take the money from these accounts as it is only reserved for buying a house (Edit: just found out we are allowed to withdraw money from these accounts, see answer from Nigel Harper). This should not be a problem for me as I have a reasonable amount of savings built up in other accounts that I can rely on.
- If my partner and I split up then (depending on the circumstances) I have probably lost this money. Although I believe we have a strong relationship otherwise we wouldn't be considering buying a house together, and like any loving partner, I am more concerned about a break up than about losing money and try my best to avoid this situation anyway(!)
- I understand that this would only make use of £2400 of my ISA allowance each year, but hopefully it will be allowed to use the rest of your allowance on stocks and shares ISAs or (coming in april 2016) the new P2P ISA. I plan to use both of these also if it is allowed but I haven't read any clear statement yet on whether you can use them all in the same tax year.
Are there any more that others can think of?