Do I transfer Help To Buy ISA to a LISA?
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arapps
Posts: 5 Forumite
Hi all!
I've been doing research on LISAs lately and are unsure whether to transfer my Help to Buy ISA. Basically I save £500 every month, £200 into my HtB and £300 into my normal savings account (with a terrible 0.1% interest). I have around £5000 in my HtB already, which I opened a few years ago with Halifax so I am still receiving the 3.5% interest rate.
My £500 saving a month is unlikely to change over the next year. I have them on a standing order so they happen automatically. Because I'm saving a lot a month I would be able to put in the maximum £4000/yr into a LISA instead of the £2400/yr in a HtB. My question is, is it worth it? The interest rates are pretty measly at the moment (around 0.5% variable) compared to my current 3.5%. Do the calculations work out better? What's the best way to work it out?
We're planning to buy in just over a year (so I need to make a decision soon!).
Thanks in advance. Hopefully this will all make sense.
I've been doing research on LISAs lately and are unsure whether to transfer my Help to Buy ISA. Basically I save £500 every month, £200 into my HtB and £300 into my normal savings account (with a terrible 0.1% interest). I have around £5000 in my HtB already, which I opened a few years ago with Halifax so I am still receiving the 3.5% interest rate.
My £500 saving a month is unlikely to change over the next year. I have them on a standing order so they happen automatically. Because I'm saving a lot a month I would be able to put in the maximum £4000/yr into a LISA instead of the £2400/yr in a HtB. My question is, is it worth it? The interest rates are pretty measly at the moment (around 0.5% variable) compared to my current 3.5%. Do the calculations work out better? What's the best way to work it out?
We're planning to buy in just over a year (so I need to make a decision soon!).
Thanks in advance. Hopefully this will all make sense.
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Comments
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The way I look at it is that the government's 25% bonus outweighs any interest you earn by a considerable margin and therefore you optimise your return by getting as much as possible into 25%-earning territory, which realistically means maxing a LISA.
So, open a LISA asap, transfer your HTB into it at the end of the tax year and ensure that you top up the LISA to the full £4K (excluding your HTB contributions prior to this tax year, which should also be circa £4K) before year-end too. By the end of April 2018 that £8K will be boosted to £10K with the 25% bonus.
Then keep paying your monthly £500 into the LISA - from April 2018 the bonus is applied monthly so each £500 will promptly become £625, so by the time you get to autumn 2018 you should have contributed something like £11K which will magically have become £13,750!
More details at http://www.moneysavingexpert.com/savings/lifetime-ISAs#property60 -
Thanks for the reply. I'm going to open a LISA today but hold off on transferring the HtB over just yet so I can maximise on interest. One thing I'm confused about though is:
Let's say I have £6000 in my HtB in March 2018. The LISA limit is £4000/yr. Does that mean I can only transfer £4000 from my HtB before April 5th? Then wait for the next financial year to transfer the last £2000. Then from then I only have £2000 left to deposit for that year?
I read somewhere that that's not the case. You can transfer the full £6000 and then put in a further £4000 within that year, as the transfer from a HtB doesn't count towards the £4000/yr LISA limit.
It's really confusing on what I can/can't do!
From the link you posted in your reply, it says I can have both a HtB ISA and a LISA open at once. If I use the LISA to save towards a property and use it for the 25% bonus, can I then just pay in other money into the HtB ISA and just use it for the interest? So basically a well-paid savings account? Or am I not allowed to deposit into both at the same time?
Thanks0 -
Let's say I have £6000 in my HtB in March 2018. The LISA limit is £4000/yr. Does that mean I can only transfer £4000 from my HtB before April 5th? Then wait for the next financial year to transfer the last £2000. Then from then I only have £2000 left to deposit for that year?
I read somewhere that that's not the case. You can transfer the full £6000 and then put in a further £4000 within that year, as the transfer from a HtB doesn't count towards the £4000/yr LISA limit.From the link you posted in your reply, it says I can have both a HtB ISA and a LISA open at once. If I use the LISA to save towards a property and use it for the 25% bonus, can I then just pay in other money into the HtB ISA and just use it for the interest? So basically a well-paid savings account? Or am I not allowed to deposit into both at the same time?
So, if you have enough funds to go round, you can transfer your pre-17/18 HTB funds to a LISA, add the full £4K into the LISA by the end of 17/18 and then keep piling in as much as possible into the LISA in 18/19, while continuing to use the HTB for the interest on any surplus money over and above what you're paying into the LISA in both 17/18 and 18/19.0 -
Ideal!The rule is that HTB funds from before the current 2017/18 tax year can be transferred into a LISA without counting towards the £4K annual LISA allowance, but anything contributed to an HTB in 2017/18 and then transferred into the LISA does count towards the £4K allowance.
Does this include interest before April 2017? My interest is paid in January, when I opened the HtB isa. Or can I only transfer my contributions?
This is probably a silly question but I'm about to go through the application process. How do they know the money I deposit which is before this tax year is what I say it is? How do they know not to count that towards my 4K limit for this year?0 -
Does this include interest before April 2017? My interest is paid in January, when I opened the HtB isa. Or can I only transfer my contributions?This is probably a silly question but I'm about to go through the application process. How do they know the money I deposit which is before this tax year is what I say it is? How do they know not to count that towards my 4K limit for this year?It will be necessary for ISA managers who are transferring Help to Buy: ISA funds to separate the transferred amount between:
- Previous year account (i.e. pre 6 April 2017) – which will not count towards the Lifetime ISA payment limit, and
- Current year account (i.e. 2017/18 subscriptions and proceeds, which will count towards the Lifetime ISA limit.
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