First-time buyers trick: Max LISA and Help to Buy ISA gains by timing it right

HEROWHENZERO · 21 March 2017 at 8:52PM

I had a house back in 2004 for a year, lost the house when i split up with the ex and have been renting ever since. Am I still classed as a home owner in the eyes of using a LISA so save for a house? Effectively I see myself as a first time buyer again, as I have no house at all in my name. Secondly, my wife is a true first time buyer, therefore if she was to open a LISA and save, would we be able to use that money to buy a house together in the future as "first-time buyers".

WillPS · 22 March 2017 at 11:48PM

HEROWHENZERO wrote: »

I had a house back in 2004 for a year, lost the house when i split up with the ex and have been renting ever since. Am I still classed as a home owner in the eyes of using a LISA so save for a house? Effectively I see myself as a first time buyer again, as I have no house at all in my name. Secondly, my wife is a true first time buyer, therefore if she was to open a LISA and save, would we be able to use that money to buy a house together in the future as "first-time buyers".

If you've ever owned a house, you're out of luck.

My friend "inherited" his grandfather's house when he was a teenager - in actual fact his Dad had arranged it all that way as some sort of tax or bankruptcy fiddle, and he didn't particularly benefit from it; but he had technically briefly owned a house and so couldn't benefit from the Help to Buy ISA.

I understand the rules are the same.

fawcett17 · 30 March 2017 at 10:03AM

Hi,

My current situation is that I have been saving into a H2B ISA for the past year and have accumulated £3,600 (£1,200 initial payment + £2,400 in monthly contributions).

I am looking to open a LISA in the 2017/18 tax year and I am unsure about how the government bonus is calculated when I transfer the H2B to the LISA. From reading this article I understand that I should transfer £1,600 in April 2017 and then continue contributing £2,400 into the H2B. I would then have £6,000 in H2B by March 2018 (£2,400 + £3,600), am I correct in my saying that the 25% bonus from the H2B would be paid into my LISA when I transfer? e.g £6,000*1.25=£7,500 to transfer over.

My next question is... if you add the £7,500 to the £1,600 in the LISA by March 2018. What would the 25% LISA government bonus be at the end of the 2017/2018 tax year? i.e would it be 25% on £9,100 balance in the LISA by March 2018 or would it be 25% on just the £4,000 LISA limit for that tax year?

Thanks in advance,

QWERTYSTAR · 30 March 2017 at 2:53PM

I just wanted to know if the LISA can be used for any property or are you restricted to buying a new build?

Ed-1 · 30 March 2017 at 6:43PM

fawcett17 wrote: »

Hi,

My current situation is that I have been saving into a H2B ISA for the past year and have accumulated £3,600 (£1,200 initial payment + £2,400 in monthly contributions).

I am looking to open a LISA in the 2017/18 tax year and I am unsure about how the government bonus is calculated when I transfer the H2B to the LISA. From reading this article I understand that I should transfer £1,600 in April 2017 and then continue contributing £2,400 into the H2B. I would then have £6,000 in H2B by March 2018 (£2,400 + £3,600), am I correct in my saying that the 25% bonus from the H2B would be paid into my LISA when I transfer? e.g £6,000*1.25=£7,500 to transfer over.

My next question is... if you add the £7,500 to the £1,600 in the LISA by March 2018. What would the 25% LISA government bonus be at the end of the 2017/2018 tax year? i.e would it be 25% on £9,100 balance in the LISA by March 2018 or would it be 25% on just the £4,000 LISA limit for that tax year?

Thanks in advance,

If you transfer the money out of the Help to Buy ISA, you don't get the Help to Buy bonus unless you close that account and follow the procedures to claim the bonus to buy a first-time house at that point.

However, by transferring it into a LISA, you will get the LISA bonus as normal when it is paid, the same as it is paid on all LISA contributions.

So your LISA balance will consist of the £6000 transferred over from the Help to Buy ISA, plus interest, plus the £1,600 of contributions straight into the LISA. Therefore in April 2018, you'd receive a 25% bonus on the £7,600 balance, i.e. £1,900.

fawcett17 · 1 April 2017 at 7:18PM

Hi Ed,

Thank you for your response, I still don't understand what the benefit of transferring your H2B balance to your LISA in March-2018 as oppose to doing it straight away in April-2017?

Could you explain the benefit?

Thanks,
Matt

Ed-1 · 1 April 2017 at 10:14PM

fawcett17 wrote: »

Hi Ed,

Thank you for your response, I still don't understand what the benefit of transferring your H2B balance to your LISA in March-2018 as oppose to doing it straight away in April-2017?

Could you explain the benefit?

Thanks,
Matt

There isn't a benefit other than the fact the H2B ISA interest rate is likely to be higher than the LISA so by leaving the money in the H2B ISA longer, you're getting more interest, plus the H2B ISA can be used before April 2018 to buy a house. Other than those, no reason not to transfer sooner as long as you can find a LISA to transfer to!

kopite32 · 2 April 2017 at 9:48PM

My plan is to keep feeding my high interest Help to Buy ISA throughout 17/18 and then transfer the part of the Help to Buy ISA built up before 17/18 into LISA in March 2018 deposit an extra £4k into LISA, and then continue feeding both my H2B ISA and LISA from 18/19 onwards.This i what i want to do but is this possible? I thought you had to transfer and close the help to buy isa in the 2017/18 tax year to get the £1100 bonus from help to buy isa as il have the max £4400 in now. Or is just transferring the whole lot to a lifetime isa in march 2018 a better option? ? Please help

Ed-1 · 3 April 2017 at 12:29AM

kopite32 wrote: »

My plan is to keep feeding my high interest Help to Buy ISA throughout 17/18 and then transfer the part of the Help to Buy ISA built up before 17/18 into LISA in March 2018 deposit an extra £4k into LISA, and then continue feeding both my H2B ISA and LISA from 18/19 onwards.This i what i want to do but is this possible? I thought you had to transfer and close the help to buy isa in the 2017/18 tax year to get the £1100 bonus from help to buy isa as il have the max £4400 in now. Or is just transferring the whole lot to a lifetime isa in march 2018 a better option? ? Please help

You only have to close the H2B ISA to get the H2B ISA bonus. If you transfer some to LISA you'll get the LISA bonus instead.

There's nothing to say you have to close the H2B ISA to get the LISA bonus. You can have both open together.

kopite32 · 3 April 2017 at 11:52PM

So would it not be better to transfer and close the help to buy isa then that way you would get the help to buy bonus and the lisa bonus come april 2018?? Whats the advantage of keeping both open? Even tho i would like to keep both open i would be losing out on £1100 help to buy bonus for not closing this account?

I read this on another site
Greater potential bonus
With both the Help to Buy ISA and Lifetime ISA, the government adds 25% to your savings. At up to a £1,000 a year you could receive a greater bonus from a Lifetime ISA in just 13 months than a Help to Buy ISA.
This is how it works:
£4,400 plus interest (max possible) transferred from H2B ISA in 2017/18 tax year – at least £1,100 bonus paid after 6 April 2018
£4,000 contribution to LISA on 6 April 2017 - £1,000 bonus paid after 6 April 2018
£4,000 contribution to LISA on 6 April 2018 - £1,000 bonus paid May 2018
Total bonus £3,100 paid no later than May 2018.

So can you just transfer £4400 from your help to buy isa and keep it open and still get the help to buy isa bonus or does the help to buy isa have to be closed to get both bonuses in april 2018? This is what is confusing me?

First-time buyers trick: Max LISA and Help to Buy ISA gains by timing it right

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