Lifetime ISAs guide
Comments
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BTL means you own property so are not a FTB. Govt don't care what mortgage deal you have - that's between you and your bank. You could still have a LISA to save and withdraw at 60.0
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Hi all,
I have a question that relates to the way in which the government bonus is paid. I understand that in the 2017/2018 financial year, the 25% bonus is paid at the end of the year (end of April/beginning of May). I also understand that the bonus is paid monthly thereafter - is this monthly payment the full 25% bonus in the month that £4000 is paid in, or is it incremental payments each month totalling 25% at the end of the year?
The reason I ask relates to when I should pay in to my LISA in the 2018/2019 tax year.
Should I pay in £4000 right at the beginning of the 2018/2019 tax year (I assume this is preferable if the monthly payments are incremental totalling 25% at the end of the year)?
or
Should I pay in right at the end of the tax year (I assume this is preferable if the full bonus is paid in the month that the £4000 is paid in. This way I will get more interest from the money as it sits in another account).
Thanks in advance for your help.0 -
saver82990 wrote: »Hi all,
I have a question that relates to the way in which the government bonus is paid. I understand that in the 2017/2018 financial year, the 25% bonus is paid at the end of the year (end of April/beginning of May). I also understand that the bonus is paid monthly thereafter - is this monthly payment the full 25% bonus in the month that £4000 is paid in, or is it incremental payments each month totalling 25% at the end of the year?
The reason I ask relates to when I should pay in to my LISA in the 2018/2019 tax year.
Should I pay in £4000 right at the beginning of the 2018/2019 tax year (I assume this is preferable if the monthly payments are incremental totalling 25% at the end of the year)?
or
Should I pay in right at the end of the tax year (I assume this is preferable if the full bonus is paid in the month that the £4000 is paid in. This way I will get more interest from the money as it sits in another account).
Thanks in advance for your help.
How much you depost will have no bearing on how interest is paid. Not everyone will be able to deposit the full £4000. As with all interest rates the advertised rate is what you are paid in total per annum. So per month the interest you will receive will be 0.25/12 = 0.02 interest per month. So it is financially adventageous to pay the full amount in as soon as you can.... no where else is offering 25% interest per annum!Homeowner:j0 -
Yes after the first year with delayed bonus in April/May you will get the next bonus in proportion to how much you payed in each month. So if you pay in 100 you will soon get a 25 bonus and you could do this across the tax year to keep getting bonuses up to the annual limits.
Skipton will pay the interest based on daily balance of the account so if you pay in earlier you will get the bonus earlier and therefore gain more interest across the year.
However the Skipton interest is really low so there is a case for saving in a higher interest 5pc account and making the contribution towards the end of the tax year even though you would be forfeiting most of the low interest on the bonus for that year
Alex0 -
Yes after the first year with delayed bonus in April/May you will get the next bonus in proportion to how much you payed in each month. So if you pay in 100 you will soon get a 25 bonus and you could do this across the tax year to keep getting bonuses up to the annual limits.
Skipton will pay the interest based on daily balance of the account so if you pay in earlier you will get the bonus earlier and therefore gain more interest across the year.
However the Skipton interest is really low so there is a case for saving in a higher interest 5pc account and making the contribution towards the end of the tax year even though you would be forfeiting most of the low interest on the bonus for that year
Alex
That's not correct at all. If you paid in £100 in one month the interest earned in that month would work out as around £2 on that £100 alone excluding interest earned on the rest of the money in the account. And then around £25 in total in the whole year. The government are not paying 25% interest per month/
There really isn't a case for saving in a higher 5% account, yes the interest paid by Skipton is poor but the interest paid by the government hugely outweighs that.Homeowner:j0 -
That's not correct at all. If you paid in £100 in one month the interest earned in that month would work out as around £2 on that £100 alone excluding interest earned on the rest of the money in the account. And then around £25 in total in the whole year. The government are not paying 25% interest per month/
There really isn't a case for saving in a higher 5% account, yes the interest paid by Skipton is poor but the interest paid by the government hugely outweighs that.
The Government don't pay interest. They pay a 25% bonus on up to £4,000 in that year.
You can get that £1,000 bonus at any time during the tax year. Getting the bonus earlier in the year means you'd get 0.5% interest on that £1,000 which you wouldn't get otherwise. But you'd also have to only get 0.5% interest on the £4,000 you'd put in which could've been earning e.g. 5% elsewhere.
5% x 4,000 = £200.
0.5% x 5,000 = £25.
I know what I'd be doing and it's not what you suggest.0 -
@Lolly88 not sure you read my post properly (try reading it again) and I think you are getting confused between the government bonus and the Skipton interest? The government don't pay any interest (and don't care how long it is deposited during the tax year) but Skipton would pay interest on the contribution and bonus from the dates they go into the account.
The interest from Skipton earned in a day, month or year would be negligible which is why I suggested you would be better using a 5% regular saver and then LISA wrapping before the end of the tax year to get the 25% bonus.
Alex0 -
The Government don't pay interest. They pay a 25% bonus on up to £4,000 in that year.
You can get that £1,000 bonus at any time during the tax year. Getting the bonus earlier in the year means you'd get 0.5% interest on that £1,000 which you wouldn't get otherwise. But you'd also have to only get 0.5% interest on the £4,000 you'd put in which could've been earning e.g. 5% elsewhere.
5% x 4,000 = £200.
0.5% x 5,000 = £25.
I know what I'd be doing and it's not what you suggest.
Thanks for your answer. So basically it would make most sense to wait until the final month of the 2018/2019 tax year before transferring in £4000. This way I can earn more in a higher interest account during the year before getting the full £1000 bonus paid at the end of the year?0 -
Yes because the interest on getting the £1000 bonus early is worth less than the improved interest you would get by putting the £4000 somewhere better for most of the tax year.
However providers do get busy towards the end of the tax year so it might be worth opening the account early with a minimum deposit so that all you have to do is contribute more. This means if there are delays (eg verifying your identity, etc) that's all sorted in advance. You don't want to have it so close that you risk not getting the bonus!
Alex0 -
Yes because the interest on getting the £1000 bonus early is worth less than the improved interest you would get by putting the £4000 somewhere better for most of the tax year.
However providers do get busy towards the end of the tax year so it might be worth opening the account early with a minimum deposit so that all you have to do is contribute more. This means if there are delays (eg verifying your identity, etc) that's all sorted in advance. You don't want to have it so close that you risk not getting the bonus!
Alex
Thanks. Yeah I opened an account with £1 back in June to avoid any delays.
One other question:
When transferring money from my Help To Buy ISA into my LISA it states that "any Help To Buy ISA contributions made before 6 April 2017 don't eat up your LISA allowance". Does this include interest that has been earned on money in my HTB ISA?
For example, on 6 April 2017 I had £4289 in my HTB ISA (£4200 in contributions plus £89 in interest). Can I transfer the whole £4289 without it affecting my LISA allowance for this year, or will the £89 be deducted from the amount I can put in this year (i.e. only allowing me to put in another £3910)?
Again, thanks in advance for any help!0
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