Published On: Sat, Sep 7th, 2019

Martin Lewis: Money Saving Expert ISA warning – Help to Buy deadline looming

On Tuesday Martin Lewis warned households that they might face a huge fine if they ignore a certain letter to be posted through their door.

He told BBC5 Live radio that ingoring the Household Enquiry form could mean Britons are fined £1000.

He said: “Many people between July and November get sent a Household Enquiry form.

“Now if you don’t deal with that properly – check and tell them the difference – there can be a £1000 fine.”

This week he issued another warning, which could see people miss out on an amazing opportunity to save.

Martin Lewis appeared on ITV to make some urgent warnings about savings to Britons today.

Appearing as a guest on Good Morning Britain he issued a message about the Help to Buy ISA.

Martin said: “The easiest, simplest form of help for first-time buyers to build a deposit closes to new applicants on 30 November – now less than three months away.

“First-time buyers saving in Help to Buy ISAs get a 25 per cent boost from the state, so each £1,000 saved becomes £1,250.

“So if you may one day want to buy a home, consider opening one now with £1 or more, as then the facility stays available until 2029.

“The Help to Buy ISA’s replacement, the Lifetime ISA (LISA) also gives a 25 per cent boost – but other terms differ, so choosing a winner is complex…”

What are the key differences between a Help to Buy ISA and a LISA?

To open a H2B you need to be age 16 or more, but LISAs can only be opened if you’re 18 to 39 (so if you’re near that 40th birthday, open one now).

The LISA bonus is much bigger. You can save up to £4,000 per tax year in LISAs, but with H2B ISAs it’s just up to £1,200 in month one, then up to £200 a month after that. So max both out for two years and you’d have £5,800 in H2B (so a £1,450 bonus), but £12,000 in a LISA (a £3,000 bonus).

LISAs lets you buy a property up to £450,000. They can be used with any residential mortgage on any property. With a H2B, it’s a max £250,000 (£450,000 in London).

H2B bonus is triggered after just three mths of max savings, but you must have had a LISA open for a year. So if you want to buy quickly, go for a H2B ISA.

Only H2B lets you withdraw penalty-free. So they’re a no-brainer, as there’s no downside. Yet with LISAs, withdraw for anything other than a first home (or retirement when aged 60) and there’s an effective 6.25 per cent penalty.

The top H2B ISA pay more than the top LISAs. Though if a LISA wins, if you’ve enough savings to max or near max it out, its far bigger bonus makes up for the lower interest.

Martin also revealed a PPI tax notice, which could see you reclaim cash on your money.

Martin said: “The PPI deadline passed last week, but if you’re one of the millions of people who have reclaimed part of the £36,000,000,000 paid out so far, or you get a payout in the future, you’ll need to check if you’re due £100s tax back.

“This is because tax is automatically deducted on PPI payouts at the basic 20 per cent rate, even though most don’t need to pay it.

“On top of your PPI payout you will have received statutory interest (at eight per cent a year, but no compounded) for each year since you got the PPI, and it’s this bit which is taxed. This is because the tax is due because this statutory interest is paid to try to return you to the position you would have been in if you hadn’t been mis-sold PPI – it counts as savings interest as if you’d earned it on your saved cash.

“However, since the personal savings allowance launched in April 2016, most taxpayers can earn up to £1,000 a year of savings interest tax-free (£500 a year for higher 40 per cent rate taxpayers), meaning far more people have been owed tax back, and most people who have paid tax on PPI payouts since then are entitled to some money back.

“Tax is deducted at the basic 20 per cent rate, so for every £100 of statutory interest you earn, you pay £20 in tax, and the PPI payout is taxed in the year it is paid, so even if you took out a policy in, say, 2004, if it was repaid in 2016, it’s that later tax regime that counts.

“If you were a non-taxpayer in the year the PPI was paid out (currently that means earning less than the £12,500 personal allowance), unless the statutory interest pushes you over the taxpaying threshold, you can claim all the tax back.

“You can only claim back four tax years, though, as well as the current one, so the furthest you can go back is the 2015/16 tax year (though there was no personal savings allowance in that first year, so if your payout was then you’ll likely only be able to reclaim if you’re a non taxpayer)

“To reclaim tax you believe you’re owed, use the ‘Claim a refund of income tax deducted from savings and investment’ form R40 (or form R43 if living overseas), preferably filling in the online version. Yet these forms aren’t simple, as they include other things too, and may be a struggle for those who normally just pay tax via PAYE (ie, the payroll) so read Martin’s help to fill in the form and if you really, really struggle, you could call HMRC on 0300 200 3300 to discuss.

“Higher or additional-rate taxpayers will need to declare the extra income (just the statutory interest) to HMRC to ensure they pay the correct tax. Contact your tax office, or call the number above if you need more info.”

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