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  • FIRST POST
    • GuruAsh
    • By GuruAsh 18th Mar 17, 8:19 PM
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    GuruAsh
    Cash ISA to Lifetime ISA Transfer Scenario
    • #1
    • 18th Mar 17, 8:19 PM
    Cash ISA to Lifetime ISA Transfer Scenario 18th Mar 17 at 8:19 PM
    I have £4000 in a Cash ISA, can this be transferred into the new Lifetime ISA without affecting the £4000 limit per year saving limit?

    I presume the 25% contribution would not apply to this lump sum transfer but only to the money I manage to save in the 2017/18 tax year? Is this the case?

    Thanks for any responses in advance.

Page 1
    • masonic
    • By masonic 18th Mar 17, 9:35 PM
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    masonic
    • #2
    • 18th Mar 17, 9:35 PM
    • #2
    • 18th Mar 17, 9:35 PM
    With the exception of money added to a HTB ISA before the end of this tax year, all transfers into LISAs would be treated as new money and subject to the £4000 annual limit.
    • GuruAsh
    • By GuruAsh 18th Mar 17, 10:04 PM
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    GuruAsh
    • #3
    • 18th Mar 17, 10:04 PM
    • #3
    • 18th Mar 17, 10:04 PM
    Thanks for your response masonic, much appreciated.

    One more query if I may.

    In your opinion, would you consider it sensible to move £1200 from the Cash ISA into a HTB ISA now (before April 6th 2017) and then move (transfer) that £1200 into a LISA when available. I'd also move the remaining £2800 in the Cash ISA to a non-ISA account or S&S ISA.

    Thanks again.
    Last edited by GuruAsh; 18-03-2017 at 10:06 PM. Reason: Transfer money on LISA account opening. Rather than an ad-hoc transfer.
    • Ed-1
    • By Ed-1 18th Mar 17, 10:36 PM
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    Ed-1
    • #4
    • 18th Mar 17, 10:36 PM
    • #4
    • 18th Mar 17, 10:36 PM
    Thanks for your response masonic, much appreciated.

    One more query if I may.

    In your opinion, would you consider it sensible to move £1200 from the Cash ISA into a HTB ISA now (before April 6th 2017) and then move (transfer) that £1200 into a LISA when available. I'd also move the remaining £2800 in the Cash ISA to a non-ISA account or S&S ISA.

    Thanks again.
    Originally posted by GuruAsh
    The £4000 if transferred straight from cash ISA to LISA would use up the 17/18 LISA limit but not count against the £20000 ISA allowance for 17/18.

    Yes, you could put £1200 in a H2B ISA in March and then a further £200 in April (before 6th April) and then transfer that £1400 into LISA and then you'd have the full £4000 LISA limit for 17/18 still intact.
    • masonic
    • By masonic 19th Mar 17, 6:56 AM
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    masonic
    • #5
    • 19th Mar 17, 6:56 AM
    • #5
    • 19th Mar 17, 6:56 AM
    In your opinion, would you consider it sensible to move £1200 from the Cash ISA into a HTB ISA now (before April 6th 2017) and then move (transfer) that £1200 into a LISA when available. I'd also move the remaining £2800 in the Cash ISA to a non-ISA account or S&S ISA.
    Originally posted by GuruAsh
    It depends whether the £4000 has been paid into your cash ISA during this tax year. If so, you'd have to transfer the cash ISA to a split ISA provider to enable you to fund the HTB ISA by way of transfer. Alternatively, you could just withdraw all of the money you paid into the cash ISA this tax year and use it to start funding the HTB ISA (as Ed-1 points out, you'll be able to get your April £200 allowance in there before the start of the next tax year).

    Presumably, you wish to max out your LISA contributions in the future and therefore want to get as much in there as possible from the start. If so, then it is a good idea. Otherwise, it's probably better to preserve the existing ISA money and either flexibly withdraw it or transfer it all to a S&S ISA.
    • masonic
    • By masonic 19th Mar 17, 7:13 AM
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    masonic
    • #6
    • 19th Mar 17, 7:13 AM
    • #6
    • 19th Mar 17, 7:13 AM
    The £4000 if transferred straight from cash ISA to LISA would use up the 17/18 LISA limit but not count against the £20000 ISA allowance for 17/18.
    Originally posted by Ed-1
    That's an interesting theory. The £4000 we are considering here will be previous year cash ISA subscription money when the tax year rolls over. Could you point out where in the draft LISA regulations there is provision for transfers of previous year money into LISAs to work in the way that you describe?

    From my reading of the new regulations, this is governed by draft new regulations 4ZA(b), 10A(3)(g). The former sets the limit of £4000 for current year payments and 10A(3)(g) sets out that transfers from other types of ISAs are defined as current year payments.

    I have not seen anything to suggest that current year payments in accordance with draft new regulation 10A(3)(g) are excepted from the overall subscription limit of £20,000 [regulation 4ZA(1)]
    - except "the first or only transfer from a Help to Buy ISA (as described in regulation 5DDC) to a Lifetime ISA in the year 2017-18 in an amount not exceeding the balance on the Help to Buy ISA as at 5th April 2017"
    • GuruAsh
    • By GuruAsh 19th Mar 17, 10:11 AM
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    GuruAsh
    • #7
    • 19th Mar 17, 10:11 AM
    • #7
    • 19th Mar 17, 10:11 AM
    Thanks for the helpful responses Ed-1 and masonic.

    I suppose the conundrum would be that the £4000 was paid entirely in this tax year.

    So to implement my goal would be to do the following:

    1. Transfer £3000 from my Cash ISA in to a non-ISA (regular savings) account, or a S&S ISA or even back to a current account temporarily?;
    2. Open a H2B ISA;
    3. Transfer request from my existing Cash ISA of £1000 (Cash ISA now empty after this) into the H2B;
    4. Pay £200 into the new H2B from another account i.e. current account;
    5. In first week of April, pay another £200 into the H2B, taking the amount to £1400

    ** Do steps 4 and 5 breach the rules in which one can only pay into a single Cash ISA (whether a normal Cash ISA or H2B) in a tax-year?

    7. When the LISA's available, initiate a transfer request from the H2B into the LISA.
    8. Continue to save into the new LISA for remainder of the tax-year.

    Thanks
    • Ed-1
    • By Ed-1 19th Mar 17, 10:27 AM
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    Ed-1
    • #8
    • 19th Mar 17, 10:27 AM
    • #8
    • 19th Mar 17, 10:27 AM
    That's an interesting theory. The £4000 we are considering here will be previous year cash ISA subscription money when the tax year rolls over. Could you point out where in the draft LISA regulations there is provision for transfers of previous year money into LISAs to work in the way that you describe?

    From my reading of the new regulations, this is governed by draft new regulations 4ZA(b), 10A(3)(g). The former sets the limit of £4000 for current year payments and 10A(3)(g) sets out that transfers from other types of ISAs are defined as current year payments.

    I have not seen anything to suggest that current year payments in accordance with draft new regulation 10A(3)(g) are excepted from the overall subscription limit of £20,000 [regulation 4ZA(1)]
    - except "the first or only transfer from a Help to Buy ISA (as described in regulation 5DDC) to a Lifetime ISA in the year 2017-18 in an amount not exceeding the balance on the Help to Buy ISA as at 5th April 2017"
    Originally posted by masonic
    I can't be bothered to trawl through the regulations to find it but the last bullet point of 1.8 in the original technical note and 1.24 of the updated technical note:

    https://www.gov.uk/government/publications/design-of-the-lifetime-isa-technical-note
    • masonic
    • By masonic 19th Mar 17, 10:33 AM
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    masonic
    • #9
    • 19th Mar 17, 10:33 AM
    • #9
    • 19th Mar 17, 10:33 AM
    Thanks for the helpful responses Ed-1 and masonic.

    I suppose the conundrum would be that the £4000 was paid entirely in this tax year.

    So to implement my goal would be to do the following:
    Originally posted by GuruAsh
    There are two problems with step 3:
    (1) Even though you have removed all but £1000 from your cash ISA and can therefore transfer it in full to the HTB ISA, you haven't accounted for closing interest, which may push you over the HTB ISA limit. This first deposit may need to be combined with the £200 allowance for the first month so that you can transfer up to £1200 in one go, but you do need to make sure closing interest won't push you over the limit. You would need to withdraw a bit extra to allow for this.
    (2) cash ISA transfers can take up to 2 weeks, so you are in danger of the transfer not completing before the end of the month, which would reduce the amount you can pay in this tax year by £200.

    A better solution is to simply "self-transfer", which entails withdrawing all money from the cash ISA (closing it is optional) and then paying it in as new money to the HTB ISA. This is covered under a clause in the ISA rules and is permitted (once only per tax year).

    Steps 4 and 5 are not problem because when you transfer an ISA in full to another ISA, you are treated as never having paid into the original ISA. The self-transfer clause covers the situation where you empty the original ISA yourself by explicitly declaring the subscriptions to the second cash ISA as valid.
    • masonic
    • By masonic 19th Mar 17, 10:37 AM
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    masonic
    I can't be bothered to trawl through the regulations to find it but the last bullet point of 1.8 in the original technical note and 1.24 of the updated technical note:

    https://www.gov.uk/government/publications/design-of-the-lifetime-isa-technical-note
    Originally posted by Ed-1
    Thanks, I doubt the regulations would have been so clear on this point anyway.
    • GuruAsh
    • By GuruAsh 19th Mar 17, 10:57 AM
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    GuruAsh
    Thanks again!

    This self-transfer method meaning I could transfer from my cash ISA to my current account?

    Then open a new H2B and deposit in from my current account?

    If you don't mind, could you point me in the direction of where this clause exists please? I suppose banks et al aren't permitted to mention the 'self-transfer' method? Haven't heard of it before so thanks for pointing that out

    Really appreciate the help.
    • masonic
    • By masonic 19th Mar 17, 11:01 AM
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    masonic
    If you don't mind, could you point me in the direction of where this clause exists please? I suppose banks et al aren't permitted to mention the 'self-transfer' method? Haven't heard of it before so thanks for pointing that out
    Originally posted by GuruAsh
    Yes, you should make sure you are satisfied that this is actually permitted:
    https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/581115/Guidance_notes_for_ISA_managers.pdf

    Read section 12.30 onwards (Investor error - Self transfer). It is 12.32 that permits this.
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