How Does the Help to Save Scheme Work?
HMRC administer the new Help to Save program. It’s a type of government savings account that can reward low income savers with a 50% tax-free bonus.
You must be in work and getting one of the qualifying benefits to open an account. But, it means you could get a bonus of 50 pence for every £1 that you save over a 4 year period.
The government apply the bonuses at the end of the second and the fourth year anniversary of the account. The amount you save, up to a maximum of £50 each calendar month, determines how much bonus you get.
Any amount that you have saved in the Help to Save account is safe and secure. Money invested by low earners is completely backed by the government.
There are several easy ways to pay money into the Help to Save account. You can use a bank transfer, a debit card, or set up a standing order.
It is a flexible saving scheme. You are not compelled to pay money into the account every calendar month. Even so, you can pay in as many times as you like. But, £50 is the most you can pay in during any calendar month.
There are some differences to a traditional deposit savings account. You cannot withdraw cash from your Help to Save account. Instead, you would need to withdraw it to your bank account.
The Help to Save account would close after four years. You would not be able to reopen it or start another Help to Save scheme. But, you would get to keep all the money saved in your account.
Even though you can close an account at any time, closing it early means you would miss the next bonus. Once closed, you would not be able to open another one.
Help to Save Eligibility Criteria
To join the Help to Save scheme and open an account you must be (either):
- Entitled to Working Tax Credit and getting either Child Tax Credits or Working Tax Credit payments.
- Claiming Universal Credit and have a household income of at least £617.73 in the last monthly assessment period.
Note: Any calculations of household income should not include any payments received from Universal Credit. You would be able to continue using a Help to Save account even if you stop claiming welfare benefits.
As a rule, you must be living in the United Kingdom to qualify for the Help to Save scheme. But, citizens who live overseas would be able to apply for an account if they are (either):
- A Crown servant (includes their spouse or civil partner).
- A member of the British armed forces (includes their spouse or civil partner).
Help to Save Bonus Schemes
Account holders can earn two (2) tax-free bonuses over a period of four (4) years. You would still get any earned bonuses even if you withdraw money.
The first of the bonuses comes at the end of the first two year anniversary. But, you would only get it if you have been saving money in the account. The allocated bonus would be 50% of the highest balance that you saved.
If you continue saving, the second and final bonus would come after four years. The final bonus would be 50% of savings paid into the account above the highest balance saved in the first two years.
So, an account would not earn the fourth year final bonus if the highest balance did not increase from the end of the second year.
Note: HMRC do not pay bonuses into Help to Save accounts. So, any bonus earned would get paid into your own personal bank account instead.
How Much You Can Pay In
There is a limit on how much you can pay into your account each calendar month. The maximum amount you can save is £50 per month (£2,400 over the 4 years). Thus, you cannot earn more than £1,200 in bonus money from your savings during the four years.
You are able to pay in £20 each calendar month for two years without needing to make any withdrawals. So, your highest balance would be £480 and the first bonus would be £240 (50% of £480).
Saving an extra £300 in years 3 and 4 increases your highest balance from £480 to £780.
So, in this example your final bonus would be £150 (50% of £300). It would not affect your bonus even if you withdrew some money after the balance reached £780.
What Happens after a Withdrawal
HMRC have made the Help to Save scheme flexible, easy to use, and secure. The aim is to help people on low incomes build up a fund for a ‘rainy day’. It also encourages positive savings habits and behaviours.
But, withdrawing your money from the government savings account would make it harder to:
- Grow the amount to reach the highest possible balance (e.g. £2,400).
- Earn the largest possible final bonus available after four years of saving (e.g. £1,200).
How the Scheme Affects Welfare Benefits
The government is encouraging low earners to save money through a Help to Save account. But, it can affect your eligibility to get certain benefits and the amount that you can get.
Working Tax Credit
Savings or bonuses earned through Help to Save do not affect the amount of Working Tax Credit you get.
Universal Credit
Saving in the scheme will not affect how much Universal Credit you get if you or your partner do not have more than £6,000 in personal savings. This amount would include any savings in your Help to Save account.
Housing Benefit
Saving in the scheme will not affect how much Housing Benefit you get if you or your partner do not have more than £6,000 in personal savings. This amount would include any savings in your Help to Save account.
How to Apply for Help to Save Scheme
You need to have a Government Gateway account to make a Help to Save application. You can set one up when applying online. You will also need to provide your bank details in the United Kingdom.
Following that, besides being able to check service availability and issues, when you sign in to your Help to Save account you will be able to:
- Check the current balance and read any messages.
- Learn how to set up a standing order.
- Make withdrawals and send money to your bank account.
- View the savings, bonus payments, and the date of the next bonus.
The simple service that allows you to sign in to your Help to Save account online is also available in Welsh language (mewngofnodi i’ch cyfrif Cymorth i Gynilo).
Note: The short video presented by HM Revenue and Customs [1:16 seconds] explains more about the new government savings account called Help to Save.
Note: Call the helpline telephone number 0300 322 7093 if you cannot access the Internet. You can open a new Help to Save account any time from September 2018 to September 2023.