Personal Finance

Help to buy ISA – is it halal?

We’ve been getting a bunch of queries on whether the government Help to Buy ISA is sharia-compliant or not.

Our view in a nutshell is yes the Help To Buy ISA government scheme is halal provided that it makes a material difference to your ability to save for a deposit. You must give away the interest but can keep the government bonus.

In coming to this conclusion we’ve consulted with a Mufti too. Read more details of the fiqhi analysis below.

NOTE: The Help To Buy ISA scheme ends on 30 November 2019. You can’t open an account after this date.

IFG TOP TIP: open an account with just £1 before then and you will still be able to save thereafter.

Wait a minute, isn’t there interest involved?

Correct.

But let’s take a step back and understand what’s going on here from a fiqhi perspective.

The government bonus element of the Help To Buy ISA is sharia-compliant. That’s because it’s something the government gives as a gift in order to help homebuyers. It’s not a commercial matter in its spirit, it’s purely policy-driven. So it’s not riba.

The issue here is that a Help To Buy ISA is basically like opening a cash ISA. So it’s basically a savings account for which you get paid interest on the savings you make (and the government bonus bit is separate altogether). You have providers like Lloyds, Barclays, etc. Sadly, you can’t ask them not to pay interest.

On a side note, we need to have a voice at government-level that means that easy sharia-compliant alternatives are available on launch. Commercially, I’m sure the likes of Lloyds would be interested in getting free money (i.e. money they don’t need to pay interest on).

Back to the point: this interest is problematic because as Muslims, we can’t receive interest.

So why is the Help To Buy ISA halal then?

We consulted with a Mufti on this (our very own Ibrahim Khan is also a trained scholar but this is something we also wanted an external view on).

The conclusion is as follows:

The Help To Buy ISA is halal if it makes a material difference to your ability to save for a deposit. The maximum you can save in a Help To Buy ISA is £12k. So you get a maximum bonus of £3k (25%).

So if you need to save £15k for a deposit, and you’re going to have the Help To Buy ISA long enough to save for it, that £3k bonus is relatively significant as an overall percentage.

But if your deposit is £100k, then I’d question whether that £3k is actually material to you.

The judgment call you need to make is: is the Help To Buy ISA bonus from the government going to make a material difference to me?

If the answer is yes – then go for it (and give away the interest).

If the answer is no – then avoid.

Ok, where can I read more about the scheme?

We’ve provided the best two links (in our view) for comprehensive information. But at a high level, these are the key things about a Help To Buy ISA:

  • It provides you with a 25% bonus on the amount you save within the ISA;
  • You can save a maximum of £12,000 in the account so the maximum bonus you’ll ever get is £3,000;
  • You can save a lump sum of up to £1,200 in the first month and up to £200 per month thereafter;
  • You need to get your solicitor to apply for the bonus once your house purchase has gone through.

The best two guides we found are as follows:

  1. The MoneySavingExpert guide
  2. The Money Advice Service guide.

Conclusion

We hope this helps you to understand when the Help To Buy ISA is halal and when it’s haram.

For more content on halal investments, personal finance and business, join our email club!

Click here to read about a different sharia-compliant Government-scheme that gives a 25% bonus per annum (not the LISA!).

11 Comments
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11 Comments. Leave new

  • It will very good opportunity for muslim people to get halal mortgage to sort their accommodation.

    Reply
  • It would be beneficial if you clarify which Mufti you consulted, it will help clarify the reputablity of the fatwah. Also, I am curious to know which scholars gave Br Ibrahim Khan permission to give fatwa, as you implied he does give fatwa when you mentioned he’s a trained scholar.

    I understand the above can come across as a bit direct and even rude, but I am just asking for my own piece of mind, as I discourage taking fataawah from people unless they’re qualified to give fatwah, and individual ijtihaad from students of knowledge who are not qualified in the shar’i sense is a disservice to knowledge.

    Reply
    • check our about us page.

      Reply
      • Jazaakumullahu khayr for your response. Is the mufti consulted the person on that page? If so, this should be explicitly mentioned in the above fatwah

        The wording of these fataawa should be done in a way where it can be sourced accurately and give clarity for the reader.

        Also, the word ‘tutelage’ may be better worded as “permission to give fatwa on xyz issues by Sh Akram” or the likes. Tutelage can easily be interpreted as studying in the Shaykh’s institute and getting a certificate, which many people do, and that doesn’t necessarily mean they can give fatwah/have permission to do so. I’m sure you know Azhar/Madeenah grads who have no malakah in Arabic let alone religious sciences.

        May Allah bless the work you all are doing, I do follow the page and have benefited from it, and I hope my words above can be seen as genuine naseeha that can add value to your vision, and I didn’t mean it to be portrayed as having a dig, but I do believe knowledge is an amaanah that needs a solid isnaad, and I hope it is appreciated many Muslims feel this way.

        Reply
        • My brother / sister … It is remarkable that you don’t realise this, but in an Islamic context, a certificate is traditionally a permission to give fataawah. Universities in Europe simply translated the word إجازة into what today we call a certificate. So I’m sad to see that your concern is about these semantics as it indicates a complete memory loss with regards to our Islamic educational heritage.

          Reply
  • In a scenario where my wife and I are both saving up for a house could both of us open our own Help to buy accounts and get double the benefit?

    Reply
  • Thank you for bringing this to our attention folks. Could you expand on the reasoning behind your willingness to permit indulging in this account, given its involving interest? Granted it’s the only way of accessing this incentive, but what Islamic legal basis do you have for allowing people to chase this incentive via a setup where we would be taking interest even if it is given away immediately?

    With current accounts or maybe even car insurance there’s a justifiable need, but that need is less obvious when it’s 3k towards the price of your first house, no? Is it perhaps about the purpose of the vehicle being for the government bonus (as per tuition fees) rather than being for the interest?

    Reply
    • Salaam Moemen – exactly the latter is the reasoning. But the threshold condition (that it will actually make a difference for you) is also important. If you can entirely avoid it and be perfectly fine in buying your house, then do that. But if £3k will move the needle for you, then it would be seen as acceptable.

      Reply
  • Salaam.
    Is it halal to keep money in a current account with Lloyds for example where I am not accumulating interest?

    Reply

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