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  • FIRST POST
    • MSE Eesha
    • By MSE Eesha 25th Jul 16, 2:53 PM
    • 92Posts
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    MSE Eesha
    First-time buyers trick: Max LISA and Help to Buy ISA gains by timing it right
    • #1
    • 25th Jul 16, 2:53 PM
    First-time buyers trick: Max LISA and Help to Buy ISA gains by timing it right 25th Jul 16 at 2:53 PM
    This is the discussion to link on the back of Martin's blog. Please read the blog first, as this discussion follows it.





    Please click 'post reply' to discuss below.
Page 1
    • Taaarm
    • By Taaarm 25th Jul 16, 8:27 PM
    • 1 Posts
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    Taaarm
    • #2
    • 25th Jul 16, 8:27 PM
    • #2
    • 25th Jul 16, 8:27 PM
    "Rule no. 3 – Definitely won’t buy before April 2018?"
    What is the advantage of having both a HTB / LISA over the 17/18 financial year, and investing into both? Why would you not transfer your HTB fund into your LISA in April '17 and just invest £200 a month into LISA (like you would in your HTB)?
    • Ed-1
    • By Ed-1 25th Jul 16, 9:21 PM
    • 2,043 Posts
    • 1,102 Thanks
    Ed-1
    • #3
    • 25th Jul 16, 9:21 PM
    • #3
    • 25th Jul 16, 9:21 PM
    "Rule no. 3 – Definitely won’t buy before April 2018?"
    What is the advantage of having both a HTB / LISA over the 17/18 financial year, and investing into both? Why would you not transfer your HTB fund into your LISA in April '17 and just invest £200 a month into LISA (like you would in your HTB)?
    Originally posted by Taaarm
    Two reasons I can think of:

    The main one is the Lifetime ISA has a penalty for getting the money back out whereas the H2B ISA doesn't so saving into H2B ISA first is more flexible if you decide against buying later on.

    The second is interest rates on the LISA are likely to be lower than on H2B ISAs.
    • hjscores
    • By hjscores 27th Jul 16, 6:01 AM
    • 9 Posts
    • 1 Thanks
    hjscores
    • #4
    • 27th Jul 16, 6:01 AM
    Paying off debt vs HTB ISA
    • #4
    • 27th Jul 16, 6:01 AM
    Hi

    I know that paying off debts is the absolute key instead of saving as well however, I wondered if it would be worth me opening a HTB account now and saving the £200? This would be whilst I'm also paying off debt (that only has a 6% interest rate).
    I want to do this as I'm concerned that it'll take me two years to be debt free and the account might not be available then.
    • bigsi70
    • By bigsi70 27th Jul 16, 12:46 PM
    • 3 Posts
    • 1 Thanks
    bigsi70
    • #5
    • 27th Jul 16, 12:46 PM
    • #5
    • 27th Jul 16, 12:46 PM
    Just helping my daughter with her and her boyfriends HTB and one of them has just reached the £1600 after 3 months and they have been offered a house - great. Looking at the solictor fees, they want £175 + VAT to claim the HTB money, meaning that the £400 bonus is effectively £190. More people ripping the youngsters of today off!!
    • littlerosco
    • By littlerosco 27th Jan 17, 9:42 AM
    • 2 Posts
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    littlerosco
    • #6
    • 27th Jan 17, 9:42 AM
    • #6
    • 27th Jan 17, 9:42 AM
    "Rule no. 3 – Definitely won’t buy before April 2018?"
    What is the advantage of having both a HTB / LISA over the 17/18 financial year, and investing into both? Why would you not transfer your HTB fund into your LISA in April '17 and just invest £200 a month into LISA (like you would in your HTB)?"

    I was wondering the same thing...

    I was planning to transfer my H2B in April which will be £4000 and then put in a lump sum of £4000 into the LISA at the same time. Wouldn't this £8000 earn more interest over 1 year, even if perhaps at a lower rate than H2B, rather than putting £200 a month into H2B and then transferring it in April 2018?
    • Ed-1
    • By Ed-1 27th Jan 17, 12:46 PM
    • 2,043 Posts
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    Ed-1
    • #7
    • 27th Jan 17, 12:46 PM
    • #7
    • 27th Jan 17, 12:46 PM
    Wouldn't this £8000 earn more interest over 1 year, even if perhaps at a lower rate than H2B,
    Originally posted by littlerosco
    How would it earn more interest if it's at a lower rate?

    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 (unless a miraculous LISA account becomes available that betters my H2B ISA before then), deposit an extra £4k into LISA, and then continue feeding both my H2B ISA and LISA from 18/19 onwards.
    • littlerosco
    • By littlerosco 1st Feb 17, 3:36 PM
    • 2 Posts
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    littlerosco
    • #8
    • 1st Feb 17, 3:36 PM
    • #8
    • 1st Feb 17, 3:36 PM
    How would it earn more interest if it's at a lower rate?

    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 (unless a miraculous LISA account becomes available that betters my H2B ISA before then), deposit an extra £4k into LISA, and then continue feeding both my H2B ISA and LISA from 18/19 onwards.
    Originally posted by Ed-1
    Obviously it depends on the interest rates that come out but for the LISA, if I transfer the money from my H2B on opening, which will be 4k by April 5th (which I'm currently getting interest of 3.5%), plus the 4k allowance I would have an £8000 lump sum earning interest from day one. Whereas with the H2B I would only be able to put in £200 per month so even if the interest rate is higher, the amount I'd be earning interest on daily or monthly would be lower as it's only dripping in.

    Also, in my situation, I will be using the funds from my LISA to eventually buy a house, so I can't continue to save into both a H2B and a LISA in the 18/19 tax year as you can only use the bonus from one to put towards a house (Except in 17/18 when you are allowed to transfer money saved into the H2B before 5.4.17 into the LISA without it counting towards the LISA limit).

    So, I am guessing I will need to see the interest rates before making a decision but any more thoughts on the best plan of action?
    • Ed-1
    • By Ed-1 1st Feb 17, 7:34 PM
    • 2,043 Posts
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    Ed-1
    • #9
    • 1st Feb 17, 7:34 PM
    • #9
    • 1st Feb 17, 7:34 PM
    Obviously it depends on the interest rates that come out but for the LISA, if I transfer the money from my H2B on opening, which will be 4k by April 5th (which I'm currently getting interest of 3.5%), plus the 4k allowance I would have an £8000 lump sum earning interest from day one. Whereas with the H2B I would only be able to put in £200 per month so even if the interest rate is higher, the amount I'd be earning interest on daily or monthly would be lower as it's only dripping in.
    Originally posted by littlerosco
    Any money is better in a higher rate account than a lower rate account regardless of whether you drip feed it in.

    The £4k you already have in the Help to Buy ISA will earn 3.5% AER for as long as you leave it in there before shifting it into the LISA. It makes no sense at all to shift it from a 3.5% account to a lower rate LISA sooner than necessary.

    For example, if a LISA becomes available paying 2% and you shift it in at account opening you have £8k earning 2% for the full year.
    That is £8,000 x 0.02 = £160 interest.

    If you keep £4k in the Help to Buy ISA for near enough the full year until transferring it to LISA at the final opportunity before 6th April 2018 you'll get just under £4,000 x 0.035 = £140 interest from the Help to Buy ISA and £4k x 0.02 = £80 interest from the LISA. That's £220 interest rather than £160.

    Also, in my situation, I will be using the funds from my LISA to eventually buy a house, so I can't continue to save into both a H2B and a LISA in the 18/19 tax year as you can only use the bonus from one to put towards a house (Except in 17/18 when you are allowed to transfer money saved into the H2B before 5.4.17 into the LISA without it counting towards the LISA limit).
    Originally posted by littlerosco
    This depends on how much savings you have in total, but there's nothing wrong with continuing to save into a Help to Buy ISA (taking advantage of the high rate) alongside a LISA and then moving it out of the Help to Buy ISA into the LISA at a future date if and when the high rate drops or is no longer competitive (obviously this would count against the £4k LISA allowance in future years).
    • AR2012
    • By AR2012 9th Feb 17, 10:03 AM
    • 124 Posts
    • 6,551 Thanks
    AR2012
    Need a bit of clarity on the timing

    I have a H2B Isa with Halifax (Was 4% now 3.5%) with £3800 + interest. In March 2017 it would hit £4200. The LISA limit is £4000. So if I drop a lump sum of £1600 into the LISA and keep feeding the the H2B ISA (£200 p/m) till March 2018. Then transfer the H2B balance (£6600) into the LISA. Would this work?
    • rebeccajade0204
    • By rebeccajade0204 2nd Mar 17, 12:52 AM
    • 2 Posts
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    rebeccajade0204
    Is this correct?

    If I have saved £3600 in HTB ISA during 2016/17, and transfer my money before April 18 to a LISA, and then save the max £4000 (max for 17/18 tax year), will I get gov bonus of £1,900? (7,600 total savings). Then if I wanted to buy after April 2018, would I be able to put in another £4000 (18/19 tax year max) and benefit from a total years gov bonus of £1000? as the bonus after the first year, goes from yearly to monthly interest?

    Dates:
    16/17 April - open H2B with years max £3600
    Transfer during April 2017 to LISA
    April 2017/18 - Add additional years max savings to LISA- £4000
    April 2017/19 - Add another additional years max savings to LISA - £4000

    Total Savings before bonus: £11,600
    Total Gov bonus: ????? £3,500 ????? if buying between may 2018 / april 19
    • opica
    • By opica 7th Mar 17, 2:53 AM
    • 9 Posts
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    opica
    Surely rule 3 and 4 breaks the rule 'that you can't pay into more than ISA in a tax year? I'm confused.

    I thought that as soon as you put anything in the Lifetime ISA (£1,£1,600,anything) when you open it on 6th April 2017 then you can only pay into the Lifetime from then on and not the Help to Buy as it would mean you have paid into two different ISA's in tax year 2017/2018?
    Last edited by opica; 07-03-2017 at 2:53 AM. Reason: missing word
    • Ed-1
    • By Ed-1 7th Mar 17, 9:27 AM
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    Ed-1
    Surely rule 3 and 4 breaks the rule 'that you can't pay into more than ISA in a tax year? I'm confused.

    I thought that as soon as you put anything in the Lifetime ISA (£1,£1,600,anything) when you open it on 6th April 2017 then you can only pay into the Lifetime from then on and not the Help to Buy as it would mean you have paid into two different ISA's in tax year 2017/2018?
    Originally posted by opica
    You CAN pay into 2 different ISAs in a tax year as long as they are different types.

    As I've posted multiple times on here, there are 4 different types of ISA from April:
    • Cash ISA (eg. Help to Buy ISA)
    • Stocks and shares ISA
    • Innovative finance ISA
    • Lifetime ISA

    You can pay into all 4 types if you want but only one of each type and within the overall £20,000 ISA allowance from April, and within the specific account limits (eg. Help to Buy ISA has a £200 per month limit; Lifetime ISA has a £4,000 per year limit).
    • opica
    • By opica 7th Mar 17, 9:01 PM
    • 9 Posts
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    opica
    Thanks Ed-1. I thought Lifetime ISA was a cash ISA. Been bugging me for a while.

    It says on the gov website;

    'You can transfer the balance in your Help to Buy ISA into your Lifetime ISA at any time if the amount is not more than £4,000.

    In the tax year 2017 to 2018 only, you can transfer the total balance of your Help to Buy ISA, as it stands on 5 April 2017, into your Lifetime ISA without affecting the £4,000 limit.'

    On 2nd April 2017 I will have £4,088.31 in Help to Buy (this includes interest).
    Can you answer these questions?

    1) . Should I stop the last payment or reduce it to stop it going over £4,000 (consequently the £88.31 is interest and not what I paid into the Help to Buy) and transfer in to a Lifetime ISA when I open one on 6th April.

    2) It says 'you can transfer the total balance of your Help to Buy ISA, as it stands on 5 April 2017, into your Lifetime ISA' above but I thought you can only open a Lifetime ISA on 6TH APRIL 2017 or later?

    3) What would the best scenario for me to maximise gains?

    Sorry to ask but it's confusing. TIA.
    • Ed-1
    • By Ed-1 7th Mar 17, 10:39 PM
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    • 1,102 Thanks
    Ed-1
    Thanks Ed-1. I thought Lifetime ISA was a cash ISA. Been bugging me for a while.

    It says on the gov website;

    'You can transfer the balance in your Help to Buy ISA into your Lifetime ISA at any time if the amount is not more than £4,000.

    In the tax year 2017 to 2018 only, you can transfer the total balance of your Help to Buy ISA, as it stands on 5 April 2017, into your Lifetime ISA without affecting the £4,000 limit.'

    On 2nd April 2017 I will have £4,088.31 in Help to Buy (this includes interest).
    Can you answer these questions?

    1) . Should I stop the last payment or reduce it to stop it going over £4,000 (consequently the £88.31 is interest and not what I paid into the Help to Buy) and transfer in to a Lifetime ISA when I open one on 6th April.

    2) It says 'you can transfer the total balance of your Help to Buy ISA, as it stands on 5 April 2017, into your Lifetime ISA' above but I thought you can only open a Lifetime ISA on 6TH APRIL 2017 or later?

    3) What would the best scenario for me to maximise gains?

    Sorry to ask but it's confusing. TIA.
    Originally posted by opica
    Answer to (1) is no as you miss off the crucial bit in your quote in (2): transfers from a Help to Buy ISA of funds built up before 6th April 2017 can be made in addition to new contributions into the LISA of £4k (i.e. they don't count against the £4k LISA limit) in tax year 2017/18 only.

    The answer to (3) depends on the rate you get on the Help to Buy ISA compared with the LISA. You can keep paying into the Help to Buy ISA and pay £4k into a new LISA alongside it, then in March 2018 transfer pre-2017/18 funds from the Help to Buy ISA into the LISA (keeping the money in the Help to Buy ISA as long as possible before transferring to LISA makes sense if the interest rate is higher than LISA).
    Last edited by Ed-1; 07-03-2017 at 10:56 PM.
    • opica
    • By opica 8th Mar 17, 12:05 AM
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    opica
    Thanks Ed-1. In last paragraph are you saying that so in March 2018 I will have a Help to Buy ISA with funds from monthly payments between 6th April 2017 - 5thApril 2018 and a Lifetime ISA with £4,000 and funds from the Help to Buy between it opened -5th April 2017.

    Sorry confused as usual.

    I think if you pay into Help to Buy and put £4K into Lifetime at same time then those monthly payments in Help to Buy after 6th April will count towards the £4K of the Lifetime and therefore will get rejected? Ie, £2,400 of the Help to Buy (if full year of £200 monthly between 6th April 2017 - 5th April 2018) counts so can only put £1,600 into Lifetime?

    After reading some articles I think the best is this?

    1) Keep doing Help to Buy till March 2018.
    2) Open Lifetime ISA on 6th April 2017. Can put £1 to get ball rolling since can only use bonus after 1 year?
    3) In March 2018 transfer Help to Buy in to Lifetime ISA.
    4) In March 2018 deposit £1,600 in to Lifetime ISA.

    TIA.
    • Ed-1
    • By Ed-1 8th Mar 17, 5:40 PM
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    • 1,102 Thanks
    Ed-1
    Thanks Ed-1. In last paragraph are you saying that so in March 2018 I will have a Help to Buy ISA with funds from monthly payments between 6th April 2017 - 5thApril 2018 and a Lifetime ISA with £4,000 and funds from the Help to Buy between it opened -5th April 2017.

    Sorry confused as usual.

    I think if you pay into Help to Buy and put £4K into Lifetime at same time then those monthly payments in Help to Buy after 6th April will count towards the £4K of the Lifetime and therefore will get rejected? Ie, £2,400 of the Help to Buy (if full year of £200 monthly between 6th April 2017 - 5th April 2018) counts so can only put £1,600 into Lifetime?

    After reading some articles I think the best is this?

    1) Keep doing Help to Buy till March 2018.
    2) Open Lifetime ISA on 6th April 2017. Can put £1 to get ball rolling since can only use bonus after 1 year?
    3) In March 2018 transfer Help to Buy in to Lifetime ISA.
    4) In March 2018 deposit £1,600 in to Lifetime ISA.

    TIA.
    Originally posted by opica
    You don't have to transfer all of the Help to Buy ISA into the LISA. You should be able to tell your LISA provider that you want pre-2017/18 funds only transferred. You can keep £2,400 from 2017/18 in the Help to Buy ISA (purely for a higher interest rate, even though you can't use the bonus anymore) and just use it as a regular savings account at a high interest rate.
    • opica
    • By opica 8th Mar 17, 6:53 PM
    • 9 Posts
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    opica
    Thanks Ed-1. Yeah this seems wisest choice.
    • Galileo Figaro
    • By Galileo Figaro 14th Mar 17, 10:28 PM
    • 64 Posts
    • 37 Thanks
    Galileo Figaro
    Does anyone know if I can use the bonus on the full balance of the LISA to buy a house in, say, 2 years, but then continue to save into the LISA and receive a bonus on my contributions to withdraw when I'm 60 or older?
    • Ed-1
    • By Ed-1 14th Mar 17, 11:56 PM
    • 2,043 Posts
    • 1,102 Thanks
    Ed-1
    Does anyone know if I can use the bonus on the full balance of the LISA to buy a house in, say, 2 years, but then continue to save into the LISA and receive a bonus on my contributions to withdraw when I'm 60 or older?
    Originally posted by Galileo Figaro
    The bonus is paid into your account soon after you put money in (like tax relief in a pension). You can choose to withdraw money from it any time you want but 25% will be deducted from the amount you withdraw if you withdraw for a purpose other than first-time house purchase before age 60.

    You can use the full balance of the LISA to buy a first house and then keep saving in it afterwards. You can open a new LISA every year if you wanted (as you can with other ISA types like cash ISA).
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