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.
Wait a minute, isn’t there interest involved?
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:
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:
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!).