Help to Save: £1200 TAX-FREE Cash From the Government!

Annie 5th Apr 2024 4 Comments

Reading Time: 9 minutes

Updated 5th April 2024

Saving when you’re on a low income seems impossible – but with the Government’s Help to Save account, it’s not only possible but lands you with a whopping 50% bonus.

Designed for those in receipt of Universal Credit, this little-known savings account is available for many people on a low income. Over the course of 4 years, you could earn a massive £1200 FREE BONUS from the Government.

Here’s everything you need to know about this well-kept secret!

1. What is Help to Save?
2. How it Works
3. Who is Eligible for Help to Save?
4. When Do I Get My Bonus?
5. What Are the Advantages of Help to Save?
6. What Are the Disadvantages?
7. Will it Affect My Benefits?
8. How to Open a Help to Save Account
9. More Ways to Save Money on a Low Income
10. Extra Ways to Earn More Money

 

What is Help to Save?

The Government wants to encourage those on low incomes to save money. But, is saving really worth it when interest rates are so low and you need all the cash you’ve got?

Help to Save is the answer. It’s an easy-access savings account that comes with an added Government bonus in the second and fourth year you hold the account. The bonus isn’t interest – so it doesn’t count towards the annual £1000 tax-free allowance for interest earnings.

For the self-employed, it’s also worth noting that these bonuses don’t count as generated income – so no need to add them on your tax return.

The key things to know about Help to Save are:

1. You can save up to £50 a month (and there’s no penalty for months you don’t pay in)
2. If you’re in a couple, you can each have a Help to Save account
3. You’re eligible if you’re on Universal Credit and earn a household income of £793.17 in one month
4. You only need to hit that earning amount once to qualify
5. In years two and four you get a bonus worth 50% your total savings of the highest amount saved in that year
6. You can withdraw your money at any time
7. It’s a Government scheme, so your money is safe (unlike, for example, a savings app that’s not covered by the FSCS rules).

How does Help to Save work?

You can pay between £1 to £50 a month into the account for a maximum of four years. You don’t have to pay in every month, either.

Withdrawals are easy and penalty-free at any time you have the account – but taking money out will reduce the amount of bonus you’ll get.

At the end of the second year and fourth year of holding the account, you’ll get paid your bonus.

This bonus is a whopping 50% of the highest amount you’ve saved to date in the account. That’s not 50% on the account balance at the time of payment: it’s the highest balance you’ve achieved ever on the account in the bonus period (which is years 1 and 2, then years 3 and 4).

That’s an important distinction: it means that, if you REALLY need to dip into your savings, you can still get the bonus on them. You just won’t be able to get the biggest bonus (as you can only pay £50 in each month).

For example, let’s say you’ve saved £400 in your account by the end of the second year. You actually managed to save £500, but had to withdraw £100 for an emergency bill payment.

Your bonus would be £250 – 50% of £500 – as that’s the highest amount you’ve held in the account so far.

Of course, if you pay in £50 a month for the full four years, that means you’ve saved £2,400 of your own money – leading to a huge £1,200 bonus total from the Government. This is paid in two instalments: at the end of year two, the maximum bonus is £600 (if you’ve saved your full allowance of £1,200). At the end of year four, when the account closes, you’ll receive a further £600 if you’ve saved another £1,200.

There are no savings accounts AT ALL that offer such a generous and GUARANTEED return! If you can get this account, do it!

 

Who is Eligible for Help to Save?

You need to show that you’re earning enough money through some paid work before you become eligible for the account. Don’t worry: it’s not a large amount and can be earned by your household so if you and your partner both have some work, both incomes count towards the amount (as Universal Credit is shared for couples, too).

You can’t use your Universal Credit payment to qualify for the account. This is where the account encourages people to work and save: if you’re earning through a job, but have a low income, you can still receive some Universal Credit – and it’s these people that the account is aimed at.

If earning the minimum amount to qualify means you won’t get Universal Credit that month, don’t panic! Your Universal Credit doesn’t automatically stop the minute you earn more than your UC entitlement. That’s why monthly assessments exist: it monitors your AVERAGE income over a period of time (making it ideal for the self-employed or those working irregular hours).

To qualify, you must:

• Receive any amount of Universal Credit
• OR receive Working Tax Credit OR Child Tax Credit
• Earn at least £793.17 from paid work in your last monthly assessment period
• Be resident in the UK

If you stop receiving benefits after opening a Help to Save account, you can keep the account for the full four years and still receive the bonuses.

When Do I Get My Bonus?

You receive your bonus directly into your bank account. It happens twice: once at the two-year anniversary and again at the four-year mark when the account closes.

It’s not paid into your Help to Save account – it’s paid into your dedicated bank account. That means if you want it to go straight into another savings account, you can put that as the account you’d like it to be paid into. Otherwise, it’ll go to your current account.

At the fourth-year anniversary, you’ll get your bonus payment and have to withdraw your full amount saved as the account closes.

What Are the Advantages of Help to Save?

The most obvious advantage here is FREE MONEY! You have to wait a couple of years to get it – but for a relatively small monthly investment, it’s a fantastic and guaranteed return of 50% on your savings. NO other savings product offers such surety or high returns. 

Other advantages of Help to Save include:

• The bonus is tax-free
• Couples can each hold an account
• You can save as little as £1 a month
• You can withdraw money if you need it
• Bonuses paid every two years (so you can anticipate the payment)
• The account doesn’t cost anything to have
• It encourages regular saving habits
• It’s easy to build an emergency savings fund

It’s also worth noting that the account is operated by NS&I, the state-backed platform – so your savings are safer here than any other bank account.

If you have a joint Universal Credit claim with a spouse or partner, and you’re both eligible, you can BOTH have a Help to Save account. That means, between you, if you save £50 each a month across the four years, you’ll have saved £4,800 PLUS get bonuses totalling £2,400 between you – that’s enough for a house deposit.

If you’re saving for a house deposit, you could maximise the Government returns by putting your bonus payments into a Lifetime ISA, and when the Help to Save account matures move across your savings into the LISA, to get an EXTRA £1,000 tax-free. There are lots of restrictions with this type of account, so make sure you research first.

Are There Any Disadvantages?

There are few disadvantages to having a Help to Save account.

You do have to meet the eligibility requirements to open an account. However, these are quite easy to meet and you only need to have met the earnings requirement of £793.17 in ONE assessment period before you open a Help to Save account. That is also a joint amount if you live with a partner or spouse – so if one of you earns £300 in a month and the other earns £500 in a month, that’s £800 total so would qualify.

That means people on irregular hour contracts, or the self-employed, may have an overall low income – but find one month makes them eligible to apply for the account.

If you have lots of debt you may be better off paying off high-interest debts than saving your money.

You can’t open another Help to Save account once your four years is over. Similarly, if you close it before your four-year term is up, you cannot open a new one.

Your savings could impact your benefit entitlement – read on for more detail.

 

Will Help to Save Affect My Benefits?

If you’re only saving into this account, and have no other savings, then your benefits won’t be affected.

If you already have some savings, however, it could affect your entitlement to some benefits.

For example, any savings over £6,000 could impact your Council Tax benefit, while savings above £16,000 disqualify you from receiving any benefits at all.

The bonus, however, is not a taxable income. This means it won’t affect your Working Tax Credit or Child Tax Credit eligibility.

 

How to Open a Help to Save Account

The Help to Save account links to your Universal Credit online account. This means it’s easy to find out if you’re eligible to apply: it’ll tell you during the application process if you’ve earned enough in your last assessment period.

Bear in mind that it can take up to a week for your assessment period to update, so wait at least 7 days after your most recent monthly assessment to apply for a Help to Save account.

Go to the Help to Save Application link to start your application. You’ll need a Government Gateway ID and password – if you don’t have one, you can set one up during this process.

Follow the steps on the screen to apply. You’ll need to add your mobile phone number so that when you log in, the system can send a security code each time for a secure login process.

When your account has been accepted and set up, you can amend your bank details. If possible, set up a direct debit to transfer a regular amount each month. This helps you remember to save every month to make the most of your saving potential!

 

More Ways to Save on a Low Income

The biggest challenge with having a Help to Save account is finding the £50 a month to save. You don’t have to save that much, of course – but if you can, that bags you the biggest bonus.

Here are just a few ways to boost your income – even without much time on your hands.

Take surveys

Online survey sites like Swagbucks and Toluna offer an easy way to make small bits of cash here and there in your spare time.

Answer surveys about your spending habits, opinions, or lifestyle for just a few minutes each day and you’ll quickly see the fund build!

Become a mystery shopper

Get paid to go shopping, visit the cinema, and even travel! Mystery shoppers review all sorts of places from retail outlets to restaurants and even airlines.

You’re sent on a mission to try a product or service. You have to then provide feedback about your shopping experience – both positive and negative – to help companies improve their service.

You’ll be paid for your time and reimbursed for your purchases – so it’s a great way to dine out for free, too!

Sell your crafts

If you’re a crafty person with a hobby that’s a passion, use it! Whether you’re a keen knitter or avid woodturner, there’s a market for your items out there.

Online shops like Etsy make it easy to sell your creations to a wide audience across the world. Just be sure to declare all income as you would a normal self-employed business – and make sure you’re not being stung by platform or shipping fees, too.

Sell your skills

You don’t have to make things to make money! Offer your skills as a tutor if you’ve got a knack for teaching, or take on the tasks everyone hates but you secretly love – like ironing.

The digital age means we’re all consuming more content than ever – and that means writers and graphic designers have come into their own as a freelance force. Use these skills to side hustle until you’ve built a solid customer base – then you can always launch as a full-time business!

You can earn up to £1,000 a year before declaring income from ‘ad-hoc’ jobs, too.

Register as a childminder

Many people on Universal Credit are either part-time workers or stay-at-home parents with children. If you’re already looking after your own children, consider registering as a childminder to watch other kids, too.

This is a hugely responsible role, but is ideal for parents who need to work around their young family.

Again, like any of these income-generating ideas: make sure you declare all payments (even cash ones) in your tax return and any Universal Credit assessments.

Use cashback websites

We don’t advocate shopping for the sake of ‘a good deal’ if you wouldn’t have bought something without that incredible discount!

However, websites like Quidco and Topcashback offer a great way to boost your income on things you’re planning to buy anyway. You earn a small percentage of each purchase back – which quickly adds up to hundreds of pounds each year.

Cashback is seen as a refund of your money and not income – so it’s not taxable for basic-rate taxpayers (so you don’t need to declare it as income, like you do for the above suggestions).