Get Rewarded For Saving With Help To Save
What is Help to Save?
Help to Save is a Government savings scheme for those on low incomes who are claiming Universal Credit or Working Tax Credit. You need to be UK resident (or posted overseas in the armed forces or as a Crown servant) and each eligible person can open an account in their own name.
You need to be either receiving Working Tax Credit or entitled to Working Tax Credit and receiving Child Tax Credit. Alternatively, you can apply for a Help to Save account if you are receiving Universal Credit and earned at least £617.73 in your last monthly assessment period.
What is so good about Help to Save?
With your Help to Save account, you get a bonus payment from the Government of up to 50% of the amount saved in your account. The account lasts for 4 years and the bonus payments are made at the end of year 2 and year 4. The bonus payments are paid into your nominated bank account (not your Help to Save account) and both the savings and bonus payments are tax free. The account is easy-access, so you can make withdrawals if needed and it is held with National Savings & Investments (NS&I) so is 100% covered by the Government.
Once you have opened a Help to Save account, you can still keep saving into it even if you no longer qualify for benefits.
Did you say free money from the Government?!
I sure did! You can get a bonus of up to £1,200 over 4 years. You can save up to £50 each month and the first 50% bonus is paid after 2 years. It is based on the highest balance of your account during the first 2 years. If you save £50 each month and make no withdrawals then after 2 years your savings will be £1,200.
The Government bonus after 2 years will therefore be £600, which is paid straight into your nominated bank account. The second 50% bonus is paid after 4 years and is based on the difference between the highest balance in years 3 and 4 and the highest balance during the first 2 years. If you are still saving £50 per month into your account and have kept the money in the account, then after 4 years you would have saved another £1,200 and your total balance will be £2,400. The difference between £2,400 and £1,200 is £1,200. You will therefore receive another £600 bonus payment into your bank account at the end of the fourth year!
Why have I never heard of this before?!
I'm not sure but keep reading....
Tell me how I apply!
You need to go to the HMRC website and log into your Government Gateway Account to assess your eligibility. The log in details are the same details you use for your personal tax credits account.
If you are having difficulty doing this online, you can call HMRC on 0300 322 7093. They will ask for your National Insurance number so make sure you have this to hand. Once your account is opened, it can stay open for up to 4 years. After 4 years, your Help to Save account will be closed. The money saved in the account and the final bonus payment will be paid into your nominated bank account
So can I manage my account online?
When you open your account, you'll get a welcome pack from HMRC as well as an account number and sort code. You will need this to pay money into your account by debit card, standing order or bank transfer. As long as you do not pay more than the £50 monthly limit, you can make as many payments as you like each month. You can manage your account online on the Government website and there is also a HMRC app which is available to download for free.
This sounds good! OK, I like to procrastinate and do trivial things before sorting my life out. When do I have to do this by?
You have until September 2023 to apply for an account.
What if I see some cool trainers that I have to buy? Can I withdraw money from the account?
Firstly, ask yourself, do you really need those trainers? Maybe give yourself a 48 hour cooling off period to help make sure you are making a considered purchasing decision!
I mean, I do really like the trainers! OK, do you think I should have another account I use as my "shoe account"?
It's OK to use your Help to Save account as a "treat myself" account but withdrawals can take 3 days and any money you take out will affect your bonus payment. For example, just say you are making payments of £40 each month into your Help to Save account and in the 17th month your MOT fails and you need access to £400. You therefore withdraw £400 from your account which has a balance of £680. Your balance will therefore drop to £280 and if you continue to make monthly payments of £40, after 2 years your balance will be £560. Your bonus after 2 years of 50% will be based on your highest balance of £680 so will be £340, which will be paid directly into your nominated bank account. However, if you hadn't withdrawn any funds and continued the £40 monthly payments, your highest balance would have been £960 and therefore your 50% bonus payment after 2 years would have been £480. However, a bonus payment of £340 is still pretty damn good!
What if my circumstances change and I can't afford to save into it anymore?
That's fine. The account is flexible and you can save between £1 and £50 each month and you don't have to save every month. The more you save the better your bonus will be, so I would open the account when you are able to start saving as you can only ever open one Help to Save account. Don't worry if you can't save every month as there are no penalties. If you miss a payment or pay less than £50 each month then you can't overpay at a later date.
If you close your account before the end of the 2 year period, you won't get any bonus payment. If you do need to withdraw all the money then it's best to leave the account open as you will still get a bonus payment at the end of the 2 years on the highest balance over that period. If you do close your account then you will not be able to open another one at a later date.
I'm confused about how the bonus in year 4 is worked out!
Let's use an example here. Just say that you manage to save £700 after year 2. You will get a 50% bonus of £350 paid directly into your bank account at the end of year 2. However, you need to withdraw all of it as your car is falling apart! In years 3 and 4 you start saving again and manage to save £900. After year 4 you would get a bonus of £100. To work this out you need to take away the highest balance in years 1 and 2 from the highest balance in years 3 and 4. In this example the difference is 200 so the bonus payment at the end of year 4 is 50% of £200 which is £100.
OK I think I get it! Does it matter that I have debts?
Having debts doesn’t stop you from opening a Help to Save account and it can be used as a way to pay off your debts. However, if you have very expensive debts and priority debts like Council Tax arrears then it may be worth paying these off first.
Will it affect my benefit payments?
The savings in your Help to Save account will not affect your Working Tax Credit or Child Tax Credit as the bonus payments are tax free and don't count as 'other income'. However, they may affect your Universal Credit or Housing Benefit payments if the savings in your Help to Save account combined with your other savings are over £6,000. If you live with your partner or Spouse then their savings are also included in the £6,000 threshold. Therefore, if you both save the maximum for 4 years under the Help to Save scheme, you will jointly have £7,200 in savings, which is over the £6,000 threshold.
What if I no longer qualify for Working Tax Credit or Universal Credit?
It doesn't matter! Once you have opened a Help to Save account, you can still keep saving into it even if you no longer qualify for benefits. You only need to be eligible on the day you apply for the Help to Save account.
OK so I don't have any pressing or really expensive debt and I'm eligible to apply. I have no investment experience and very little savings. Do you think this is the best way to save?
Yes, if you can afford to make regular payments without this adversely affecting your standard of living. Your money is 100% backed by the Government and it is most likely to beat any other low risk savings options available. To beat Help to Save, a savings account would need an interest rate of more than 23%!
Please note that this is general guidance only and not advice. The information given relates to the tax year the article was written and tax and legislation may change in future years.