Lifetime ISA can be used towards house deposit

In a technical note released today, the government said: "The Lifetime ISA and the Help to Buy: ISA are different products with different purposes. The Help to Buy: ISA is a short-term savings product targeted at supporting people buying their first home."

Just prior to completing the purchase of their first home, when their conveyancer is certain the transaction will go ahead, the conveyancer will apply for the 25% government bonus on the individual’s behalf. The bonus is added to the deposit at this point, increasing the equity that the individual has in the property. The timing of the bonus payment at completion reflects the fact that entitlement to the bonus arises from the savings being used towards an eligible housing transaction.

The Treasury has also confirmed that from 2018-19 the bonus will be claimed and paid on a monthly basis, rather than deferring until after the end of each tax year.

There has been widespread criticism of the Help to Buy ISA since the government clarified that the 25% bonus will not be paid until a sale is completed and contracts are exchanged, meaning that the money cannot be put towards a deposit.

Labour MP David Lammy has written to Housing and Planning Minister Gavin Barwell, calling on him to apologise on behalf of the Government for "misleading thousands of people" who signed up for a Help to Buy ISA in the hope it would help them to get on the housing ladder.