‘Why I have ditched my Help to Buy ISA for cash savings and the stock market’

The allure of a 25% government top up was enough to persuade me to open a Help to Buy ISA in the late 2010s.

But fast forward to 2025 and I’ve decided to do away with the account and put my money elsewhere.

Having moved into my partner’s property last year, and therefore no longer looking to buy a first home, the account was effectively redundant.

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Without the 25% bonus, and offering a paltry interest rate of 2.5%, I was losing money in real terms, based on the latest CPI rate of inflation.

Instead, I’ve put 80% of the Help to Buy money into a taxable cash savings account and transferred the remaining 20% into a stocks and shares ISA.

My cash savings account is currently paying over 4% in interest, offering far more than the Help to Buy ISA.

The interest I’ll make from the cash savings account will be well within my personal savings allowance for the 2025/26 tax year. At some point, I will transfer some or all of the money from this savings account into a cash ISA though, to protect it from the taxman.

The 20% I am adding to the stocks and shares ISA is an amount I can afford to lose. Because it’s in an ISA, any returns will be shielded from capital gains, dividend and income tax.

Moving the Help to Buy ISA money into cash savings and a stocks and shares ISA will mean my money will work harder and my returns should be stronger over the long-term.

I considered opening a Lifetime ISA, which also offers a 25% bonus from the government, as you can invest in stocks and shares with these accounts.

However, you only get that bonus if you’re buying a first home (which I no longer am) or withdrawing the money after the age of 60. If you withdraw your cash and it’s not for either of these two reasons, you are faced with a hefty 25% penalty.

I wanted a tax-wrappered account offering more flexibility than this, in case I want to withdraw my money earlier than 60 penalty-free – a stocks and shares ISA allows me to do this.

Millions ‘trapped’ with Help to Buy ISAs

More than two million savers are still stuck with Help to Buy ISAs, a recent Freedom of Information request made by comparison site Finder found.

These savers will not be able to add more money into their accounts after November 2029 and from November 2030, can’t claim the 25% bonus.

To qualify for the 25% bonus, you need to buy a house costing no more than £250,000 outside of London and £450,000 inside the capital. These limits have not changed since the Help to Buy scheme launched in December 2015, despite house prices rising by around 45% between September 2015 and September 2025, according to Land Registry data.

Sarah Coles, head of personal finance at Hargreaves Lansdown, said the Help to Buy ISA could be a ‘real shot in the arm’ for would-be home buyers, but savers who no longer need to get on the property ladder will likely do better putting their money elsewhere.

“If your plans have changed, and you’re no longer buying, this account essentially becomes a savings account with a monthly cap.

“Given that the best rate on offer right now is 3%, it’s not a particularly competitive savings account, so a cash ISA would be a more sensible option. If you want the money for a longer-term goal, you might be better off with a stocks and shares ISA.”

Cuts to cash ISA allowance as Reeves pushes for an investment culture change

Rachel Reeves confirmed in the Budget the cash ISA annual allowance limit will be reduced from £20,000 to £12,000 for under 65s from April 2027. Savers will still retain the overall £20,000 annual ISA limit.

The chancellor is seeking to push more savers towards investing their money rather than relying on the less risky but typically less lucrative option of cash savings.

Her attempts to shift people’s attitude towards riskier forms of saving may not bear fruit though, research suggests.

Polling by AJ Bell found 51% of cash ISA savers would simply put their money into a taxable savings account following a cut to the annual cash ISA allowance.

However, while stocks and shares ISAs are a riskier way of saving, returns are often greater than stashing the cash away in a taxable savings account or cash ISA – if you’re looking to invest over a longer-term period of five years or more.

Analysis from AJ Bell shows a one-off £1,000 investment in the average North America fund back in April 1999, when ISAs were first introduced, would now be worth £6,285, compared to just £2,079 if held in the average cash ISA.

The investment platform found even UK equity funds, despite two decades of market challenges, would have grown the original £1,000 to £3,787, comfortably beating cash returns and inflation over the same period.

Laura Suter, director of personal finance at AJ Bell, said the figures revealed the “hidden cost of playing it safe”.

“Inflation quietly eats away at savings, and even the average cash ISA will have struggled to keep pace. By contrast, investors who were willing to take on some risk have been handsomely rewarded,” Suter said.

If you’re looking to open a stocks and shares ISA, bear in mind you may have to pay certain fees which can impact any gains you make.

You may be charged a platform or account fee, charged as either a percentage of your investment amount or as a flat amount each month or year. You may also have to pay trading or dealing fees each time you buy or sell an investment.

Make sure you read our guides on how to start investing and the best investing apps.